The Chinese yuan rose against the U.S. dollar on Wednesday as the easing of anti-commodity rules for cross-border travellers in China had a positive impact on expectations for the country’s economic recovery.

Before the session, the People’s Bank of China set the midpoint of the dollar/yuan pair at 6.7035 against 6.693 on Tuesday. In the mainland market, the pair opened at 6.7050 and was trading at 6.7022 at mid-day.

The US dollar weakened against most other major currencies on Wednesday as a decline in Treasury bond yields slightly reduced its appeal. Investors were analysing the recession threat posed by an aggressive increase in the Federal Reserve’s key interest rate.

China on Tuesday halved the quarantine time for visitors from other countries. In doing so, it eased one of the world’s strictest anti-quota regimes, which has restricted international travel since 2020.

“This policy change is positive for the outlook for the Chinese economy, and the growth forecast for the second half of the year should be revised upwards,” said Mizuho Bank analyst Ken Cheung. In his view, it prepares the ground for further easing of restrictions. Nevertheless, the analyst believes it will still be very difficult to achieve this year’s growth target of 5.5 per cent.

The Chinese economy has recovered to some extent, but its foundation is fragile, Chinese State Council President Li Keqiang said on Tuesday. “If better-than-expected macroeconomic policy information emerges or in the June data, the dollar/yuan pair could fall closer to 6.65, the lower end of the trading range since May,” HSBC analyst Jinyan Cheng said.

It remains to be seen whether positive news will cause the pair to break the 6.65-6.80 range, he said.

Economists polled by Reuters forecast that data due out later this week will show that activity in China’s manufacturing sector rose in June for the first time in four months.

Maybank analysts believe the yuan is “not yet showing a bias in any direction” and a breakout is needed to predict its direction.

At the time of writing, the dollar index had risen to 104.51 from Tuesday’s closing level of 104.506. The US dollar/offshore yuan pair was trading at 6.7046.