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Dollar slips as traders weigh China reopening, sterling gains

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SINGAPORE/LONDON — The dollar slipped on Thursday after rising in the previous session, with investors on edge at the end of the year as initial optimism over China’s reopening fizzled.

The Japanese yen was last 0.64% higher at 133.66 against the dollar. That followed a 0.73% fall on Wednesday which saw the yen hit a one-week low of 134.50.

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The euro also edged higher, rising 0.28% to $1.064, after falling 0.27% on Wednesday.

Sterling rose 0.23% to $1.205, after slipping 0.11% the previous day.

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Analysts warned against reading too much into price moves amid low trading volumes as markets head into the new year.

“We very much appear to be in drifting mode, awaiting the turn of the year when traders return and we can get the latest thoughts from policymakers and the most up-to-date data,” said Craig Erlam, markets analyst at currency platform Oanda.

Investors are weighing the impact of China’s rapid loosening of its strict COVID-19 rules.

Following China’s removal of its quarantine rule for inbound travelers from Jan. 8, the United States, Japan, India and other countries said they would require COVID tests for travelers from China.

“Many countries adopting an additional layer of testing for travelers arriving from China reflect hobbled resumption of travel amid China’s outbreak,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said.

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“This might also fuel fears of new strains of COVID that could once again disrupt the global recovery.”

Moh Siong Sim, a currency strategist at Bank of Singapore, said: “Near term, there’s still the big question mark as to how soon can we get over this COVID resurgence.”

“In the medium term … I think the growth outlook for China can be steadier and less bumpy, and that in turn means the rest of the world could benefit from that as well,” he added.

Against a basket of currencies, the U.S. dollar index fell 0.11% to 104.23, having climbed 0.18% in the previous session.

The Aussie was last 0.23% lower at $0.672, while the kiwi slipped 0.17% to $0.63.

The Chinese offshore yuan rose 0.31% to 6.978 per dollar.

(Reporting by Rae Wee and Harry Robertson; Editing by Bradley Perrett, Stephen Coates and Andrew Heavens)

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