The Chinese yuan has appreciated 10 percent against the dollar since the start of 2017, quelling some criticism that the export giant has been deliberately suppressing its currency to gain economic advantage over its trading partners.
This is all going according to China's plan, experts said.
Although the strength of the yuan against the dollar is in part due to the greenback's weakness, experts said the world's second-largest economy is also propping up its currency to appease President Donald Trump.
China has "reversed the rise" of the dollar against the yuan, and there's now "meaningful" strength against the greenback, Bilal Hafeez, global head of G-10 foreign-exchange strategy at Nomura, wrote in a recent note.
"Part of this was likely a response to the election of President Trump and the need to avoid being labelled a currency manipulator," Hafeez added.
On the 2016 campaign trail, Trump repeatedly said he would name China a currency manipulator from his first day in office. That has not happened.
Instead, the Chinese yuan rose almost 7 percent against the dollar in 2017, reversing three consecutive years of depreciation. In January, China's currency extended gains by another 3.5 percent.
In 2017, the China Foreign Exchange Trade System RMB Index barely moved, starting the year at 94.83 and ending it at 94.85 — even though the yuan jumped against the dollar over the period. That measure is a trade-weighted index of the yuan, also known as the renminbi (RMB), as measured against a collection of currencies including the dollar, euro and Japanese yen.
"The Chinese authorities may be attempting to keep a range-bound [yuan] basket, which would mean ensuring euro (and yen) strength against [the yuan] to offset dollar weakness against [the yuan]," Nomura's Hafeez said in his note.
The CFETS RMB Index has gained about 1.3 percent so far this year. That comes even though the dollar is the heaviest weighted in the basket, and the greenback has lost over 2 percent against the yuan over the same period.