Rising speculation over the easing of Covid-19 curbs in China spurred gains in currencies tied to Asia’s biggest economy on Friday.
The baht surged more than 1% and was trading around 37.60 against the greenback, the Australian dollar rose 1% and the Canadian dollar climbed 0.6%.
The offshore yuan advanced 1.2% as Chinese stocks in Hong Kong soared on hope that Beijing is planning to move away from its stringent zero-Covid strategy, a sentiment triggered by unverified social media posts this week.
The optimism got a fresh boost in the afternoon as traders assessed a report saying China is working on plans to scrap a system that penalises airlines for bringing virus cases into the country.
While economists are not expecting a reopening to happen overnight, even a gradual loosening of restrictions would help boost activity and consumption in the world’s second-largest economy.
Investors need to tread carefully, though, as health authorities have said that China will stick to zero-Covid, a policy strongly defended by President Xi Jinping at the recent Communist Party congress.
“Once a reopening becomes clearer or lockdowns become less common, industrial metals, oil prices and the currencies of associated China exporters should benefit as a second-round effect,” said Stephen Innes, a managing partner at SPI Asset Management.
“The currency market is the most accessible barometer to digest China’s risk sentiment without getting overly complicated.”
