The Chinese currency has been rallying due to a slumping dollar, signs the economy is recovering from the virus pandemic, a yield premium over U.S. assets and optimism the country’s debt will be added to global indexes. The onshore yuan has jumped about 4% against the dollar this quarter, on track for its biggest such gain in 12 years.

“The fixing has been weaker for two days, which might be a signal that policy makers want to somewhat manage the pace of the rally,” said Hao Zhou, an economist at Commerzbank AG. “It is time for investors and policy makers to take a break and think about the pros and cons of the rally.”

The Chinese currency is flirting with its biggest quarterly advance in data going back to 1981, with the gain now just shy of a 4.2% surge to start 2008. The rally has come as the dollar slumped, sending the Bloomberg Dollar Spot Index to its lowest in two years last week. That measure of greenback strength was last up 0.2%, climbing for a fourth session to head for its highest in six weeks.

A rate premium over the U.S. is another factor bolstering the yuan. The yield on Chinese government bonds due in a decade over comparable U.S. notes is near the highest on record. Also helping sentiment are expectations that FTSE Russell will say this week that it plans to add China bonds to its flagship indexes.

The yuan is curbing the greenback’s dominance in driving price action among currencies from Group of 10 nations as Covid-19 reshapes global financial markets, HSBC Holdings Plc senior foreign-exchange strategist Dominic Bunning wrote in a note Tuesday. It is increasingly influencing weekly price changes in the pound and commodity-linked currencies such as the Australian, New Zealand and Canadian dollars, the bank said.

At the heart of the yuan’s rise is the perception that the world’s second-largest economy is rebounding and driving the global recovery from pandemic-induced recessions, Bunning wrote.

China last week reported data that showed the economic recovery is picking up. Retail sales rose in August for the first time in 2020, while industrial production expanded more than forecast.

The yuan fixing limits the currency’s moves to 2% in either direction for the session.