Today, People’s Bank of China (PBoC) strengthen Yuan by most since November 2nd last year. This morning, before market opens in Shanghai, it was fixed at 6.4628 against Dollar, an increase of 0.51%. Central bank allows movement within 2% range from this central parity.

While weaker Yuan fix, in the past one year created two market havoc, resulting in weeks of gyrations. But when Yuan is strengthening the opposite is not being true. It’s more like as Dollar is weakening and sentiment towards stock markets improving, which is fuelling Yuan.

It is largely due to the current perception about Chinese economy. Almost all asset managers cite China as their biggest risks and almost none cite it as biggest bet. That’s because to have sustained recovery, reforms need to run deeper in China and debt levels need to stabilize lower. It is difficult for China to pursue reforms such that debt burden comes down and Yuan and growth remains stable.

So Market participants while associating Yuan weakness and fix depreciation with monetary outflow, move towards hard landing, Yuan strength is just being associated with broad based weakness in Dollar. Good time to sell Yuan would be, when it fails to strengthen even when Dollar weakens. We are yet to see such a move.

Chinese Yuan is currently trading at 6.464 in onshore market, up 0.22% today so far.