The recent RMB appreciation trend has indeed drawn a lot of attention, and it has also made many investors start to wonder whether it’s a good idea to buy RMB now. After observing for some time, I’d like to share a few thoughts.

From the most straightforward data, the RMB finally reversed a three-year streak of depreciation at the end of last year. After it broke through the psychological level of 7.0, it has further accelerated its strength at the start of this year. In just three trading days after the Lunar New Year holiday, it surged by nearly 600 points, at one point even touching 6.81 and setting a new high in nearly three years. Now, in mid-May, offshore RMB is still oscillating between 6.82 and 6.95. Its cumulative gains have already exceeded 1,400 basis points—this momentum is certainly not small.

The logic behind this round of appreciation is actually quite clear. China’s export performance has been unusually strong. Last year, the trade surplus reached a historical high of $1.2 trillion, and this momentum is continuing into this year. In addition, the U.S. Dollar Index has been relatively weak overall; it even fell to a four-year low recently. Although the situation in the Middle East temporarily drove the dollar to rebound, it has now returned to narrow trading around 98. Most importantly, foreign investors are reconfiguring their RMB asset allocations—this is the real main driver behind the inflow of funds.

That said, whether buying RMB is good right now depends on the circumstances. In the short term, in February the central bank lowered the foreign exchange risk reserve ratio. This action clearly signals that it does not want the exchange rate to appreciate excessively in one direction. This means that the pace of RMB appreciation is likely to slow down, and there is a higher chance of short-term volatility. The second quarter is typically a period when companies’ demand for purchasing foreign exchange is higher, which can also put some pressure on the exchange rate.

But from a medium- to long-term perspective, the supporting logic still exists. As long as the U.S. dollar’s credibility has not been restored, and China’s economic fundamentals continue to send positive signals, the RMB still has room to strengthen further. Goldman Sachs maintains a target price of 6.70, believing there is about 22% upside relative to undervaluation for the RMB. HSBC has set its year-end target at 6.75. The optimistic stance of these international investment banks also points to the same conclusion.

So my advice is: if you have a long-term holding need or want to hedge against USD risk, buying RMB now does have some value for allocation. But you should never blindly chase the price higher. You should take a phased approach to positioning and put in place proper stop-gain and stop-loss measures. Keep a close watch on the central bank’s daily published midpoint rate and the trade data to be released later—these are important references for judging future price trends.

In the end, the foreign exchange market is mainly driven by macro factors. The data announced by each country is publicly available and transparent. Also, given the large trading volume and the ability to trade two ways, it is actually fairly balanced for ordinary investors. As long as you grasp a few core factors that affect the RMB’s movements, you can greatly improve your probability of profit. Is it a good time to buy RMB now? The key still comes down to your investment time horizon and risk tolerance.