SHANGHAI, June 28 (Reuters) - China's yuan recouped early losses to close domestic session at a one-week high against the dollar on Tuesday, as Beijing's decision to ease quarantine requirements for travellers boosted investor sentiment.
China on Tuesday slashed the quarantine time for inbound travellers by half in a major easing of one of the world's strictest COVID-19 curbs, which have deterred travel in and out of the country since 2020.
Quarantine time at centralised facilities has been cut to seven days from 14, and subsequent at-home health monitoring has been reduced to three days from seven, the National Health Commission said.
The onshore yuan recouped early losses and finished the domestic trading session at 6.6876 per dollar, 64 pips firmer than the previous late night session, and was the strongest such close since June 20.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.693 per dollar, 80 pips weaker than the previous fix of 6.685.
Despite the turnaround, gains in the yuan were rather limited, as investors continued to worry about widening divergence in monetary policy between China and other major economies, after its central bank head said monetary policy would continue to be accommodative to support economic recovery.
The comments to state media by PBOC Governor Yi Gang contrasted with the hawkish stance of other global central banks.
The remarks, along with recent higher cash injections via open market operations to smooth half year-end liquidity tensions, pressured the yuan's swap curve in the forwards market into negative territory and weighed on yuan expectations, currency traders said, although the impact was expected to be limited.
"As long as the PBOC maintains an accommodative monetary policy but not the ultra-loose easing akin to Bank of Japan's (BOJ) style, we do not expect JPY-similar depreciation to take place in the RMB market," said Ken Cheung, chief Asian FX strategist at Mizuho Bank, noting the yuan weakness was cyclical.
Some participants said the market was waiting for more clues from upcoming economic data for a clear direction. June economic indicators, including official factory activity data, are due later this week.
Separately, sources told Reuters that China was considering extending its onshore currency trading hours to 3 a.m. Beijing-time (1900 GMT) from 11:30 p.m. (1530 GMT) at present, a move that could spur demand for the yuan from global investors.
(Reporting by Winni Zhou and Brenda Goh; Editing by Richard Pullin and Sherry Jacob-Phillips)
