(Bloomberg) -- China’s yuan looks set to rebound in the next three months, if history is any guide, according to a Bloomberg analysis.

Strategist Simon Flint looked at the currency’s performance after times it has neared the weak side of its 2% trading band against the dollar and found that over subsequent months the yuan has tended to strengthen. He suggests a central bank approach of waiting for a shift in the dollar’s fortune is the right one, in Tuesday’s Macro Models column.

The yuan, along with regional peers, is facing increasing stress as the dollar threatens to strengthen on bets the Federal Reserve will keep interest rates higher for longer. Beijing’s underwhelming policy support for flagging China growth is also weighing on investor sentiment. 

China has maintained a strong hold on the yuan for most of this year as the nation’s wide interest-rate gap with the US favors the greenback. Worsening capital outflows have also ramped up the pressure on the currency of late. 

“For most episodes in history, the PBOC was able to keep the yuan stable until market environment shifts in the favor of the currency,” said Fiona Lim, a senior strategist at Malayan Banking Bhd. 

--With assistance from Simon Flint.

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