China's Yuan Hits Six-Month High

09/08/2014 9:00 am EST

Focus: CURRENCIES

Alfonso Esparaza

Senior Currency Strategist, OANDA

OANDA senior currency strategist Alfonso Esparza discusses the recent six-month rally of the Chinese currency following the sharp selloff earlier in the year and what to expect moving forward, especially in regards to the strength of the US dollar.

China's renminbi hit a six-month peak last week, extending a rally that it began in May following a sharp selloff earlier this year.

The currency gained 2% against the greenback since hitting a 19-month trough of 6.2669 on April 30. While the Chinese Yuan (USD/CNY) remains down over 1% 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 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.

By Alfonso Esparza,Senior Currency Strategist, OANDA

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