Sheana Chung, a portfolio manager for T. Rowe Price, believes the yuan is currently overvalued and due for a correction, despite its recent strength. Chung notes that the currency has gained approximately $0.05 against the dollar this year, driven by China's relatively strong economic recovery and a weaker dollar earlier in 2026. However, she expects a reversal as global growth converges and the dollar potentially strengthens.
Chung highlights that the yuan's appreciation has been significant, reaching levels that make Chinese exports less competitive. She cites concerns from Chinese policymakers regarding export performance, suggesting they might tolerate or even encourage a more moderate yuan in the near future. This sentiment aligns with recent actions by the People's Bank of China (PBOC) which, according to some analysts, has been setting the daily central parity rate at weaker levels, signaling a preference for growth over currency strength.
The T. Rowe Price manager points to several factors that could contribute to a yuan pullback, including potential shifts in global interest rate differentials and a rebound in the U.S. dollar. She also suggests that if Chinese economic growth momentum slows, or if there's a need for further economic stimulus, a weaker yuan could act as a buffer, making Chinese goods cheaper abroad and boosting export-oriented industries. This outlook contrasts with some earlier predictions that saw the yuan potentially strengthening further to as much as 5 yuan per dollar under certain conditions, such as a large unwind of greenback holdings by local firms.
