The Chinese currency advanced to its strongest level against the US dollar in three years as global investors look for safer assets amid China’s strong economic rebound and the continuing depreciation of the dollar.
The onshore yuan rose 0.2% on Tuesday to 6.4052 per dollar, strengthening by more than 10% over the past year.
However, analysts say that Chinese policymakers might take measures to control the currency’s appreciation trend as they are struggling to balance the country’s export demand with soaring commodity prices.
“The RMB still sees the firmest appreciation pressure, and this translates to the 6.4000 being still in the spotlight,” strategists at OCBC Bank told Reuters.
Economists say a yuan that’s too strong could hurt the country’s exporters. According to Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong, “The People’s Bank of China (PBOC) is aware of the RMB appreciation risk given slowing China (economic) growth momentum in Q1 and still uneven recovery.”
The strategist said that “The CNY [yuan – Ed.] fixings in coming days will be monitored for any PBOC FX policy guidance.”
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