The Chinese currency retains growth potential while remaining competitive for an export-led economy. This is the conclusion reached by analysts at BCA Research, who emphasized that the current exchange rate of the Yuan does not fully reflect the country's fundamental capabilities.

Shortly before the Lunar New Year holiday, the offshore Yuan reached its highest value against the dollar in almost three years. This was driven by the weakening of the US dollar, which revived discussions about the future role of the dollar as the world's key reserve currency.

Chinese President Xi Jinping previously spoke of the need to transform the Yuan into a "strong currency" that is more actively used in international settlements and reserves. Meanwhile, US President Donald Trump noted that a weak dollar benefits Washington because it helps correct trade imbalances.

BCA Research strategists, including Chester Ntonifor and Marko Papic, believe that a gradual strengthening of the yuan could facilitate structural changes within China. A more appreciated currency, they argue, would help shift the focus from exports to domestic consumption, which remains subdued amid protracted problems in the real estate sector.

Furthermore, a stronger yuan could reduce capital outflows and support Beijing's strategy to reduce dependence on the US. Analysts emphasize that the global trade market continues to expand, and with a competitive exchange rate, the Chinese economy can maintain its position even with a strengthening currency.

BCA Research believes that a long position in the yuan against the Hong Kong dollar could be attractive in the coming years. However, as the global perception of China's competitiveness changes, a shift to other currency strategies is possible.