THE yuan yesterday advanced to the strongest level since May 2018 as the market appetite for emerging-market currencies grew amid easing fears over the new COVID variant.

The onshore yuan gained as much as 0.2 percent to 6.3515 per U.S. dollar, breaching a year-to-date high reached in May, while the offshore rate advanced 0.2 percent.

The moves came as the U.S. dollar is poised to decline for a second straight week amid bets that the Omicron variant won’t stall global recovery.

The yuan has gained 2.7 percent this year, making it the best performer among major currencies, as China’s economy recovered from the pandemic and foreign investors added Chinese bonds.

A lack of aggressive measures from China’s central bank to stall the yuan’s advance also boosted traders’ confidence that the appreciation will be sustained.

The outlook on the currency, however, is looking uncertain as the People’s Bank of China moves to ease monetary policy by cutting the amount of cash lenders need to set aside as reserves this week.

That means China’s policy will diverge further from the United States, making yuan assets less appealing for foreign investors. (SD-Agencies)