The Chinese currency has started drawing investor attention as a safe haven asset from volatility after its best performance in more than a decade.

The onshore renminbi gained almost four percent in the three-month period ending September 30, the most since early 2008. Its offshore counterpart advanced by more than four percent. That exceeded traditional Group-of-10 currencies like the Swiss franc and the Japanese yen.

Analysts say Beijing’s success in fighting the Covid-19 pandemic and its economic fallout has attracted both praise and investment, and fueled speculation that the yuan could become a new sanctuary for the risk-averse.

The offshore yuan has been “less volatile throughout this time period and the liquidity in the currency remains quite good relative to many currencies,” Brad Bechtel, global head of foreign exchange at Jefferies, said in a Bloomberg TOPLive blog. “China has done a lot of work on improving their capital markets and access to those markets and that is likely to continue which will improve liquidity and attract capital flows.”

This week, investors sent the offshore yuan to its highest level since May 2019, with the currency rallying as much as 0.8 percent on Thursday, the most in almost three months. Data showed that overseas holdings of Chinese sovereign debt have risen 22 percent this year through August.

China is projected to be the only major economy to grow this year after the coronavirus battered global productivity. Economists surveyed by Bloomberg expect the nation’s GDP to rise 2.1 percent compared to a 4.4-percent estimated drop in the United States.

According to Bechtel, the renminbi now often trades as much per day as the franc or sterling. Trading in the currency grew 41 percent between 2016 and 2019.

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Analysts still point to some risks and barriers to the yuan’s wider use despite its growing influence. Data from the International Monetary Fund showed that while global reserves in the Chinese currency have grown to 2.1 percent, up from 1.4 percent two years ago, more than 60 percent of holdings are still denominated in the US currency. They also say that the Chinese currency could be vulnerable to volatility ahead of the US election.

“Political debate will naturally focus on the US-China trade relations, with possible questions over the continuity of the Phase one deal, and whether new trade measures are likely to be considered,” Chang Wei Liang, a macro strategist at DBS Banking in Singapore, said. “This could stoke tensions, and keep yuan traders wary.”

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