On Monday, there was a sharp rise in the Chinese yuan after the reopening of the local markets from a week-long Lunar New Year holiday.

Likewise, most of the other Asian currencies also recorded gains in anticipation of a meeting of the Federal Reserve this week and the release of a slew of economic data.

The rise

There was a 0.4% rise in the Chinese yuan due to bets that the country’s economic recovery would see a boost due to the Lunar New Year holiday.

According to state media reports, there had been a considerable recovery in domestic spending and travel in the past week.

Markets are now keeping their eye out on important business activity data that will be released in China this week, as this would give more cues about whether lifting the zero-COVID policy benefitted the economy or not.

Analysts have already forecast that both manufacturings, as well as non-manufacturing purchasing managers’ index (PMI), will see an improvement.

However, it is expected that the overall activity would still remain in the contraction territory. Traders also remain uncertain about the timing of China’s economic recovery.

This is due to the fact that the country appears to be dealing with its worst outbreak of COVID-19 infections.

Economic recovery

Nonetheless, China’s economic recovery would certainly be a good sign for broader Asian markets, as they are depending on the country as their trading partner.

Recent sessions have already seen a sharp rise in the commodity markets, such as prices of oil and copper, and this is because of expectations of demand from China.

There was a slight strengthening recorded in broader Asian currencies, while the US dollar also firmed ahead of a meeting of the US Federal Reserve in the week.

It is widely expected that the central bank would deliver an interest rate hike of 25 basis points in its meeting.

Focus

But, the focus will be more on the forecast of the central bank about its monetary policy, considering that the recent data had shown a rather mixed picture of the country’s economy.

The dollar index as well as dollar index futures were mostly flat at 101.9. The focus this week would also be on the euro zone’s GDP data, along with the nonfarm payroll data in the US.

There was a 0.2% rise in the Japanese yen, while gains of 0.3% were also recorded in the Taiwanese dollar, as the currencies rose in tandem with China.

There was a 0.2% drop in the Indian rupee and recent sessions have seen the currency lag behind its peers, with data showing that inflation had eased in recent months in the country.

On Monday, a poll showed that interest rates would be increased by the Reserve Bank of India (RBI) one more time in the next week before it hits pause on its tightening cycle.

However, this scenario would not bode well for the Indian rupee, which was termed as one of the worst-performing currencies in Asia in the previous year.