The Chinese yuan has rebounded to a 4-1/2-month high against the greenback amid an upswing in the world's second-largest economy, raising the question of whether the currency can continue the trajectory even as the Fed tightens the screws on monetary policy.
Since falling to year-to-date lows of 6.258 at the end of April, the yuan has strengthened 1.56 percent against the greenback to 6.157, tracking the increasingly robust Chinese economic data.
On Thursday, the yuan traded stronger than the midpoint for the first time since March. The spot rate is allowed to trade 2 percent above or below the midpoint set by the People's Bank of China.
According to Khoon Goh, senior FX strategist at ANZ, the yuan rally has further legs despite the dollar-friendly environment. "We see two sources of further demand for CNY, over and above the normal trade and FDI [foreign direct investment] related demand," he said.