(Bloomberg) -- The yuan extended gains, jumping to its strongest in nearly two weeks, as hopes over a relaxation of China’s Covid curbs stoked optimism about the country’s economy and fueled appetite for riskier assets.

The currency surged as much as 1.1% to 7.0797 per dollar, as speculation over China reopening dominated market sentiment Wednesday afternoon. The yuan has been on a roller-coaster ride this week, slumping on Monday after Chinese residents protested against Covid restrictions and then paring losses in the following sessions on reopening hopes. 

“We do think China is clearly on the path heading towards reopening, though there might still be some temporary setbacks and disruptions,” said Xiaojia Zhi, head of research at Credit Agricole CIB. “We remain constructive on the yuan medium term with the expectation of China recovery on the back of reopening and likely peaking out of the dollar.”

China’s once-strict Covid-Zero rhetoric seems to be moving in a more nuanced direction. Beijing said it would bolster vaccination among its senior citizens, a move regarded by health experts as crucial to reopening. The central city of Zhengzhou, home of Apple Inc.’s largest manufacturing site, is lifting a lockdown on its main urban areas. Also, stories of people who survived infections are popping up in state-run media.

Read: Softer China Stance on Covid Emerges in Media, Official Rhetoric

Looser measures have also been seen on the quarantine front. Southern Guangdong province said close contacts who meet certain requirements can remain at home instead of going to a centralized isolation facility. Beijing will allow elderly, children and other people who stay at home for long periods to skip mass Covid tests from Wednesday, according to a local government briefing. 

However, not everyone is as optimistic about China’s reopening process.

“People need to have more realistic expectation in terms of how this reopening will look like, and acknowledge it is a very lengthy and bumpy process,” said Becky Liu, head of China macro strategy at Standard Chartered Bank. “In general, dollar-yuan will be in a range of 7-7.2 until the first half of 2023, and then it will slightly appreciate to 6.95 by end-2023.”

--With assistance from Wenjin Lv.

©2022 Bloomberg L.P.