OCBC’s FX Strategists Sim Moh Siong and Christopher Wong note that the CNY has gained 3.3% against the Dollar this year, outperforming Asian peers and strengthening on the CFETS basket. They attribute this to solid external demand and corporate FX conversion, with authorities tolerating further appreciation, though gains are expected to be measured and may slow near term during the dividend payment season.

Yuan strength seen as measured

"The CNY is up 3.3% year to date against the USD, outperforming Asian peers and shrugging off negative terms of trade from high oil prices."

"Strength is also evident in the CFETS basket, now nearing early-2025 highs."

"Key drivers remain solid external demand and increased corporate FX conversion."

"Authorities appear comfortable with further appreciation to support RMB internationalisation and ease undervaluation concerns."

"Currency gains should continue but remain measured given soft domestic demand and export dependence."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)