MUFG Research sees a scope for USD rebound to extend on the latest China's COVID developments.
"Shijiazhuang which is home to around 11 million people has also forbidden residents in areas deemed high risk from leaving their homes, with everyone else advised to stay at home in principle according to a statement in the official local newspaper. A mass testing exercise will also be undertaken in six major districts. The new restrictions followed a jump in new COVID cases to 641 on Sunday. Beijing also reported its’ highest number of new cases at 951 on Sunday since Bloomberg stared tracking the data on 1st September 2021," MUFG notes.
"The developments highlight that it remains premature to expect an imminent shift away from China’s hardline zero-COVD strategy at the current juncture. According to reports such a shift is unlikely until around Q2 of next year at the earliest and will be dependent on vaccine roll-out to provide better protection against the spread of COVID. The US dollar will derive more support in the near-term if there is further reversal of recent optimism over an easing of COVID restrictions in China," MUFG adds.