The yuan is headed for its best year in half a decade against the dollar, thanks to a slump in the US currency, inflows chasing China’s stock-market rebound and easing geopolitical tensions. Beijing has been guiding the yuan stronger at a carefully orchestrated pace with its fixing in the past few months as it seeks to allow currency appreciation without triggering foreign-exchange volatility.
Despite its rally versus the dollar, many argue the yuan is still too cheap on a trade-weighted basis and considering China’s entrenched deflation. Goldman Sachs Group Inc said the currency was 25% undervalued relative to economic fundamentals.
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