According to Nordea’s Kristian Nummelin, the Chinese yuan has been the best-performing Asian currency this year, appreciating against both the US dollar and the euro despite a widening yield spread between the US and China [1]. The report notes that since the onset of the Iran conflict, US yields have increased, further widening the yield differential in favor of the dollar. However, the USD/CNY exchange rate has continued to trend lower, indicating persistent appreciation pressure on the yuan [1].
Nordea highlights that the People’s Bank of China appears comfortable with a stronger yuan, as evidenced by daily fixings and the lack of policy resistance to the currency’s appreciation [1]. The analysis points to China’s large current account surplus and potential policy tolerance as supporting factors for the yuan’s continued strength against the dollar [1].
Nordea expects the gradual appreciation of the yuan versus the dollar to persist, suggesting that market participants may anticipate further strengthening in the near term, barring significant policy changes or external shocks [1].
CONCLUSION
The Chinese yuan’s outperformance and Nordea’s expectation of continued gradual appreciation signal a supportive policy environment and strong fundamentals. Market participants may view the yuan as resilient, with further appreciation likely if current trends persist.