SHANGHAI — Investors should avoid Chinese currency risk and adapt to higher foreign exchange volatility, three state financial newspapers in Shanghai and Beijing said in front-page commentaries on Tuesday after more than a week of strong gains by the yuan.

The currency may have strengthened, but this year it would be volatile in both directions, they warned.

Since the newspapers delivered essentially the same message on the same day and on their front pages, they had almost certainly been directed to do so by the government.

The yuan has strengthened 2.2% against the dollar this year, hitting an almost five-month high on Tuesday and reversing much of 2022’s annual loss, the biggest in 28 years. Optimism over economic recovery following the country’s ending of pandemic controls in late November and early December has driven the currency.

“Even if the depreciation pressure has diminished, two-way volatility in the yuan exchange rate will still be the norm in 2023,” the Securities Times said.

“The shrinking current account surplus and yield gap between China and the United States will keep adding depreciation pressure on the yuan,” it warned.

That newspaper, from Beijing, and the two others urged investors to adopt risk neutrality in foreign exchange.

The US Federal Reserve’s raising of interest rates and the resulting strength of the dollar was a key factor weighing on the yuan in 2022, since higher US yields attracted money to dollar-denominated assets.

Markets widely expect the US central bank to continue hiking interest rates at its next few meetings until it is sure that inflation has peaked.

The China Securities Journal of Beijing said improvements in China’s economic expectations remained the most fundamental force in deciding the yuan’s value.

“After a reasonable correction, the yuan will likely continue to be subject to two-way volatility, gradually converging towards a reasonable range in the long run,” the newspaper said.

The Shanghai Securities News said the value of yuan would be determined mainly by domestic factors this year. The pace of improvements in economic fundamentals would become the focus.

Recent economic indicators, including December factory activity, have suggested that surging COVID-19 infections following the removal of social restrictions disrupted production in December and weighed on demand.

Many investment banks, including Nomura and JPMorgan, have downgraded their estimates for Chinese gross domestic product for the fourth quarter and 2022. — Reuters