The Chinese yuan has appreciated around 2.4% against the dollar this year.

Hedge funds added to bullish options wagers on the currency versus the dollar as weak US jobs data signalled potential trouble for the American economy.

The volume of options bets that the yuan will strengthen, particularly around a three-month time frame, has been significant “as fast-money clients look to re-engage with dollar weakness post the data,” said Ruchir Sharma, London-based global co-head of FX options at Societe Generale.

Meanwhile, the dollar capped its deepest weekly drop in more than a month ahead of the Federal Reserve meeting that’s expected to launch a series of interest-rate cuts.

The Bloomberg Spot Dollar Index fell 0.3% on the week, the most since early August. Lackluster US labour market data have cemented bets for 75 basis points of rate cuts by year-end, even as relatively sticky inflation suggests the greenback won’t face a sudden slump.

The yuan is poised for a huge rally against the dollar as Beijing comes under pressure to let its currency strengthen, according to Eurizon SLJ Capital chief executive Stephen Jen.

The yuan has appreciated around 2.4% against the dollar this year, but it has weakened against other currencies given the even bigger drop in the greenback elsewhere.

That has created the appearance of an “opportunistic devaluation,” something Jen said will lead to pushback from China’s major trading partners.

China’s new-found tolerance for steady yuan appreciation looks set to re-accelerate a rally in emerging-market currencies, as investors brace themselves for lower US interest rates.

A Bloomberg analysis shows that over the past year, for every 1% yuan move, the Thai baht, Malaysian ringgit, Chilean peso, Mexican peso and Brazilian real have moved closely in tandem.

As the primary currency for many Asian economies’ main trading partner, the yuan acts as an anchor in the region with Beijing’s foreign-exchange policy closely watched by peers.

But its influence spreads beyond Asia to countries impacted by China’s trade and commodity flows.

Market watchers say there is room for EM currencies to resume their advance, as the People’s Bank of China has signalled a departure from its previous policy focus on maintaining yuan stability amid trade tensions.

Allowing the yuan to gradually appreciate could be “part of US-China trade talks and international pressure to let the renminbi strengthen,” said Brad Bechtel, global head of FX at Jefferies. “This will allow Asian currencies to appreciate in lock-step, which allows for easier central bank policy.”

China was the second-largest trading partner of Asia’s developing economies last year, accounting for 9% of the latter’s total trade, according to data from the International Monetary Fund.

There’s also growing evidence that borrowers across the developing world are experimenting with tapping Chinese markets to raise money, in some cases for the first time ever.

In developing countries outside China, excluding Russia, yuan-denominated bond sales have topped 15bn yuan ($2.1bn) so far in 2025, according to data compiled by Bloomberg. That’s more than any other year, and compares with just 3.5bn yuan in the same period of 2024.

Of course, fundraising in yuan is still miniscule in contrast to the size of the dollar-bond market, where developing countries outside of China raised $344bn this year. American markets remain the world’s most liquid sources of cash with deep-pocketed investors.

China has for long been extending a calculated diplomatic push to globalise the use of its currency. The country is launching a sweeping campaign to promote the global role of its currency, taking advantage of growing doubts about US exceptionalism that increasingly weakens the dollar’s appeal.

A stronger yuan is seen as aiding such efforts.