(Bloomberg) -- China’s push to internationalize the yuan has entered a “steady, slow, but nonstop” phase that is likely to support further gains in the currency, according to JPMorgan Asset Management.
The yuan may appreciate at least 10% over the long run in real effective exchange-rate terms, Julio Callegari, chief investment officer for Asia fixed income, said in an interview this week. That measure tracks a currency’s strength against a trade-weighted basket of peers while adjusting for inflation.
“We buy, and we like it,” he said in Singapore. The appeal lies in the currency’s steady performance and the prospect that those gains can continue, he added.
The offshore yuan has climbed almost 5% against the dollar this year to its strongest level since 2022, supported by resilient exports that generate foreign-currency inflows and Beijing’s push to expand the renminbi’s global use. The gains have come despite subdued inflation and a weak economy pushing Chinese interest rates lower, widening the gap with US 10-year yields to a record.
Callegari noted that while Chinese offshore bond yields of 2%-2.5% may look unattractive to some global investors next to other rates markets, steady yuan appreciation can boost total returns above dollar bonds while offering diversification and a better risk-adjusted profile.