A recent rally in China’s yuan has been primarily fuelled by stronger guidance from its central bank rather than by market forces, analysts said, pointing to a mostly steady US dollar index.
However, they noted, this period of strengthening is likely to remain measured, as Beijing prefers to avoid harming the competitiveness of its exporters amid trade tensions with the United States.
In contrast, the US dollar index showed no significant weakening – mostly fluctuating between 97.8 and 98.6 – even after Federal Reserve Chair Jerome Powell opened the door to a September interest rate cut during a speech late last month.
In a note on Wednesday, He of Gavekal said China’s central bank had “decided to push up the renminbi, even though currency markets were not moving in that direction.”
