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(Bloomberg) — Optimism over China’s economy is fueling some alternative bets in the foreign-exchange market.

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Buy the yuan against the Singapore dollar and yen on expectations that China’s growth would outperform the region, analysts say. The upbeat view has boosted the Bloomberg CFETS RMB Index, which tracks the Chinese currency’s movement against 24 trading-partners, to its highest in three weeks.

While betting on the yuan against the dollar — as China recovered from the pandemic quicker — yielded about 7% in 2020, both currencies are more or less moving in lockstep this year as the U.S. economy starts to rebound. The alternative strategies are also a reflection of how Wall Street is increasingly positioning the Chinese currency as a global play, with banks seeking more market-making opportunities.

The yuan is likely to remain strong against the basket of currencies, according to Mitul Kotecha, chief emerging-market Asia and Europe strategist at TD Securities in Singapore. “We think China is keen to maintain some relative outperformance of CNY on a trade-weighted basis. The PBOC has fixed CNY stronger than expected 16 out of the last 20 days, which is a change from recent months.”

© Bloomberg Yuan basket holds near highest level since 2018

The recommendations are tied to how the yuan trades against its partners, such as the euro and the yen, in the basket. Trades against other currencies though may still be executed in two legs via the dollar.

Citigroup Inc.’s strategist Gaurav Garg recommends long positions in offshore yuan against the Singapore dollar on expectations that China’s official CFETS RMB Index may rise further due to the nation’s strong trade balance. The currency pair tracks the index move “relatively well,” Garg wrote in a note this week.

For Scotiabank’s Qi Gao, he prefers trading the yuan against the Japanese yen. Better vaccine rollout in the European Union is expected to boost the euro, and hence the yuan, due to their close correlation.

So far this month, the yen and the Singapore dollar have risen against offshore yuan.

Another way to benefit from expectations for a stronger yuan is through the carry trade, according to Bloomberg Intelligence strategist Stephen Chiu. The baht can be used as a funding currency to invest in offshore yuan, with Thailand expected to keep rates low for longer as its tourism-reliant economy takes longer to recover from the pandemic, he said.

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