T. Rowe’s Chung Sees Pullback in ‘Expensive’ Yuan After Rally

T. Rowe Price is betting on a pullback in the yuan, arguing that it looks “expensive” against a basket of currencies from China’s major trading partners.

The asset manager turned underweight on the yuan relative to higher-yielding frontier currencies in its Diversified Income Bond Strategy this month, according to Vincent Chung, the co-manager for the product. T. Rowe Price manages about $1.89 trillion in assets globally.

The CFETS RMB Index , which measures the yuan’s performance against the currencies of Beijing’s biggest partner economies, is expected to drop 1% to 2% by year-end having climbed to its highest level since January 2025, Chung said.

T. Rowe’s view on the Chinese currency stands in sharp contrast to Deutsche Bank AG, Goldman Sachs Group Inc., and UBS Group AG, all of which expect the currency to appreciate further. In May, Macquarie Group said yuan to as high as 5 per dollar if local firms unwind a massive buildup of greenback holdings.

The onshore yuan, which has gained 2.7% this year, is Asia’s best-performing currency, defying the US dollar’s gains while benefiting from the Chinese central bank’s willingness to tolerate a stronger exchange rate.

However, Chung believes the heavy long positioning in the yuan will collide with Beijing’s efforts to smooth fluctuations. Policymakers are prioritizing stability as part of broader efforts to internationalize the currency, limiting the scope for further yuan appreciation, he said.

The People’s Bank of China is expected to yuan stability through its daily reference rates, despite from German Chancellor Friedrich Merz for global talks on exchange rates to help the European Union tackle its widening trade deficit with China.

T. Rowe’s contrarian underweight position also underscores the growing headwinds facing the yuan, including disappointing Chinese and expectations of further Federal Reserve rate hikes.

The yuan is unlikely to appreciate much further as it “obviously looks more and more expensive versus the basket,” Chung said.