The Covid-19 pandemic remains one of the most serious challenges for China. Its yuan declined against the U.S. dollar on Wednesday, the first trading session after a long holiday. China’s yuan fell due to concerns regarding the country’s economy after Shanghai prolonged its lockdown amid fast-rising Covid-19 infections.
Shanghai is China’s financial hub as well as its largest city. Authorities in Shanghai asked all of its 26 million residents to take another round of Covid-19 tests on Wednesday, adding that lockdown curbs will continue until the exercise is complete.
However, the situation in the city is not ideal. On Wednesday, China recorded close to 20,000 new cases. Though this number is still far lower than in many other countries, it is a dramatic spike for the country. China is not willing to abandon its zero-Covid strategy which it adopted in 2020.
Yuan and risk factors
According to several currency traders, a buoyant dollar also added pressure on the yuan. Federal Reserve Governor Lael Brainard’s comments raised the possibility of a more aggressive U.S. monetary tightening in 2022.
By midday, the dollar index rose to 99.574 from the previous close of 99.472. Meanwhile, the offshore yuan was trading hands at 6.3753 per dollar.