China’s renminbi hit a six-month peak this week, extending a rally that it began in May following a sharp selloff earlier this year.
The currency gained 2 percent against the greenback since hitting a 19-month trough of 6.2669 on April 30. While the yuan remains down over 1 percent year-to-date, experts say it has more room to appreciate as long as the People’s Bank of China refrains from intervening.
“Obviously, the yuan won’t be totally immune to dollar strength, but for now, it seems that strong [economic] fundamentals are dominating. We’ve seen the dollar index rising strongly but that hasn’t translated to weakness for the renminbi yet,” said Khoon Goh, senior foreign exchange strategist at Australia New Zealand Bank.
“Since May, the People’s Bank of China has stepped away from markets. Because of their quietness, investors have been focusing on foreign-direct investment, the country’s strong trade balance and portfolio flows,” Goh said.