China’s Yuan Jumps to Strongest Since 2018 as Optimism Prevails

China’s yuan climbed to the strongest level in more than two years, fueled by optimism on the country’s economic recovery and its interest-rate premium over the rest of the world.

The yuan jumped as much as 0.31% to 6.5623 per dollar, surpassing the high it reached earlier this month when a victory by Joe Biden in the U.S. presidential electionbecame apparent.

Apart from friendlier ties between Washington and Beijing, the currency is also climbing on bets the nation’s rebound from the pandemic iswell on track. The premium that Chinese government bonds offer over American debt is near the highest on record, which attracts foreign inflows and also supports the yuan.

“China will likely lead in terms of the macro economic recovery around the world in the coming six months, so its yield advantage will remain intact and the currency will keep rallying,” said Stephen Chiu, a strategist at Bloomberg Intelligence.

The currency is on course to advance for a sixth month in November, the longest rally since 2014. The yuan has jumped more than 9% since late May, wiping out more than half of the decline since a range of disputes between China and the U.S. on issues from trade to intellectual property protection kicked off, sending the currency to the weakest in a decade.

The recent strength has opened a rare window for policy makers to reform the foreign-exchange market, with Beijing moving to relax capital curbs and loosen controls on the fixing last month.

The onshore yuan pared the gain to trade 0.26% stronger at 6.5655 as of 2:32 p.m. in Shanghai. The offshore rate added 0.17%.

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