The renminbi, or the yuan, has strengthened to a three-year high against the US dollar, underscoring the rising appeal of RMB-denominated assets as global investors seek stability amid geopolitical tensions and energy-related uncertainties, analysts said.

The central parity rate of the yuan strengthened to 6.8649 against the greenback on Wednesday, strengthening by 31 basis points from Tuesday, marking its strongest level in three years, said the China Foreign Exchange Trade System.

In the offshore market, the yuan remained near recent highs after surging to an intraday peak of 6.8199 per dollar on Tuesday, its strongest level since March 2023, said market tracker Wind Info.

Wang Qing, chief macroeconomic analyst at Orient Golden Credit Rating International, attributed the recent gains partly to a decline in the US dollar index following easing tensions in the Middle East, which reduced safe-haven demand for the greenback and lifted major non-dollar currencies, including the yuan.

Even prior to a two-week ceasefire that boosted risk appetite, the yuan had appreciated against a basket of currencies.

The CFETS RMB Index, which measures the yuan against a basket of trading partners' currencies, rose to 100.87 at the end of March, the highest level since late January last year.

"Amid the outbreak of geopolitical risks in the Middle East, global foreign exchange markets have seen increased volatility, yet the RMB has remained relatively stable with a firming bias," Wang said.

"This is supported by China's stable external trade environment, strong export growth, and improving domestic consumption and investment at the start of the year."

Analysts said the yuan's resilience also reflects growing global recognition of China's economic stability and policy predictability, which are increasingly seen as rare anchors in a volatile world.

Junjie Watkins, equity partner at Pictet Group and CEO for Asia ex-Japan at Pictet Asset Management, said China offers "a degree of certainty in an otherwise uncertain environment", underpinned by its long-term development planning.

"Relative certainty is further supported by improving earnings revisions compared with other emerging markets, attractive valuations and structurally enhanced market liquidity," Watkins said, adding that a more accommodative monetary cycle is also improving visibility for long-term investors.

She said Chinese equities have demonstrated resilience amid global market volatility this year, with returns relatively uncorrelated with other major markets, strengthening international investor interest in Chinese equities.

Reflecting this resilience, the benchmark Shanghai Composite Index rebounded by about 2.7 percent on Tuesday before giving back part of the gains in the following session.

Janice Hu, China country head of UBS AG and chairperson of UBS Securities, said that Chinese assets have gradually evolved from a "portfolio option" to a "strategic must" for international investors.

"We are encouraged to see that Chinese companies are increasingly at the forefront of innovation and industry transformation, bringing new technologies, products and investment opportunities to international markets," Hu said.

Still, economists cautioned that uncertainties persist for RMB-backed financial assets.

Huang Yiping, dean of Peking University's National School of Development, warned that higher energy costs could weigh on corporate profitability and energy-intensive sectors such as artificial intelligence, while lingering geopolitical risks may disrupt business expectations.

Looking ahead, Wang of Orient Golden Credit Rating said the yuan is likely to maintain a stable and moderately strong trajectory.

"With a stabilizing external trade environment underpinning export growth and domestic demand policies gaining traction, the RMB will likely continue to show a steady trend with a firming bias amid US dollar volatility," Wang said.

zhoulanxv@chinadaily.com.cn