# Dollar slips, while yuan slumps on COVID unrest in China
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-28
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar Weakens as U.S. Bond Yields Drop
Meta Description: Learn why the dollar is falling as investors react to lower bond yields and political unrest in China. Stay updated on global currency market trends.
URL: https://financedigest.com/dollar-slips-while-yuan-slumps-on-covid-unrest-in-chinahtml

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By Rae Wee and Harry Robertson

SINGAPORE/LONDON (Reuters) – The dollar weakened on Monday as investors weighed up the recent drop in U.S. government bond yields, while anti-government protests in [China sent the yuan](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") to a two-week low.

Protests have flared across China and spread to several cities in the wake of an apartment fire that killed 10 people in the [city of Urumqi in the country’s](https://www.financedigest.com/buyers-shun-city-centres-for-country-villas-when-it-comes-to-lifestyle-investment-in-iberia.html "BUYERS SHUN CITY CENTRES FOR COUNTRY VILLAS WHEN IT COMES TO LIFESTYLE INVESTMENT IN IBERIA") far west. Hundreds of demonstrators and police clashed in Shanghai on Sunday night.

China’s onshore yuan finished the domestic session around 0.5% lower at 7.199 per dollar, the [lowest close since](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020") Nov. 10. The offshore yuan fell to a more than two-week [low in Asian trading](https://www.financedigest.com/bitcoin-traders-can-now-trade-on-lows-and-highs.html "Bitcoin Traders Can Now Trade on Lows AND Highs!") and was last down 0.1% at 7.201.

We’re really looking at the [government response](https://www.financedigest.com/pension-life-slams-government-and-regulator-in-its-response-to-scam-consultation.html "Pension Life slams government and regulator in its response to scam consultation") to what’s happening … the government response is so unpredictable, and of course that just means derisking,” said Chris Weston, head of research at Pepperstone.

The [Australian dollar](https://www.financedigest.com/asian-stocks-make-7-month-highs-australian-dollar-gains-on-hot-inflation.html "Asian stocks make 7-month highs, Australian dollar gains on hot inflation"), often used as a proxy for the yuan, slid 0.7% to $0.671.

Elsewhere in currency markets, the [dollar was last down 0.99% to 137.77 yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"). Earlier in the session it hit 137.57, its lowest [level since](https://www.financedigest.com/optimism-levels-drop-to-low-of-17-percent-according-to-first-survey-since-banking-regulations.html "Optimism levels drop to low of -17 percent, according to first survey since banking regulations") Aug. 26.

Stephen Gallo, [European head of FX strategy at BMO Capital](https://www.financedigest.com/collegiate-ac-and-shuman-capital-launch-e300-million-european-student-living-fund.html "Collegiate AC and Shuman Capital launch €300 million European Student Living Fund") Markets, said a fall in U.S. bond [yields was making the dollar](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease") less attractive.

Risk-off conditions in global markets related to China’s COVID situation appear to be showing up in lower long-term [sovereign debt](https://www.financedigest.com/sovereign-debtors-creditors-agree-on-steps-to-jumpstart-debt-restructurings.html "Sovereign debtors, creditors agree on steps to jumpstart debt restructurings") yields,” he said.

Net-long dollar/yen remains one of the larger positions amongst FX leveraged funds, and these declines in [appetite and longer-term yields may have spooked some investors.”](https://www.financedigest.com/investor-appetite-for-italy-returns.html "Investor appetite for Italy returns")

Meanwhile, the euro rose 0.41% to $1.0445, while sterling was up 0.17% at $1.21.

[China’s stringent COVID](https://www.financedigest.com/who-urges-china-to-share-specific-data-regularly-on-covid-situation.html "WHO urges China to share specific data regularly on COVID situation") restrictions have taken a heavy toll on its economy, and authorities have implemented various measures to revive growth.

Companies (in China) are currently facing weaker [retail sales](https://www.financedigest.com/uk-retailers-turn-positive-on-sales-hopes-after-bleak-winter.html "UK retailers turn positive on sales hopes after bleak winter") from a higher number of COVID cases and falling home prices from unfinished home projects,” said Iris Pang, chief economist for Greater China at ING.

On Friday, the People’s [Bank of China](https://www.financedigest.com/credit-agricole-launches-china-ma-and-investment-banking-business.html "Credit Agricole launches China M&A and investment banking business") (PBOC), the nation’s central bank, said it would cut the reserve requirement ratio (RRR) for banks by 25 basis points (bps), effective from Dec. 5.

The latest [developments in China](https://www.financedigest.com/china-most-promising-source-of-funds-for-overseas-developers-reveals-investorist.html "China ‘most promising source of funds’ for overseas developers, reveals Investorist") appeared unable to stem the U.S. dollar’s decline, which has been softening over the past few weeks on hopes that the Federal Reserve would soon slow its pace of [rate hikes – a view that was supported by minutes of the Fed’s](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") November meeting released last week.

The U.S. [dollar index opened higher](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") on Monday after closing on Friday at 106.05, but was last down 0.66% at 105.65.

[Fed Chair Jerome Powell is due to speak on the outlook](https://www.financedigest.com/oil-steadies-after-dipping-on-china-outlook-investors-await-fed-clues.html "Oil steadies after dipping on China outlook; investors await Fed clues") for the U.S. economy and the [labour market](https://www.financedigest.com/spains-labour-market-resilient-as-unemployment-drops-in-nov.html "Spain’s labour market resilient as unemployment drops in Nov") at a Brookings Institution event on Wednesday, which could provide more clues on the outlook for U.S. [monetary policy](https://www.financedigest.com/uks-ftse-100-dips-on-scope-of-tighter-monetary-policy-informa-jumps.html "UK’s FTSE 100 dips on scope of tighter monetary policy; Informa jumps").

[(Reporting by Rae Wee and Harry](https://www.financedigest.com/britains-prince-harry-arrives-at-balmoral-itv-reporter.html "Britain’s Prince Harry arrives at Balmoral – ITV reporter") Robertson; Editing by Shri Navaratnam, Simon Cameron-Moore and Susan Fenton)


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