China's yuan firmed against the dollar on Tuesday after hitting a nearly three-month high in intraday trade, buoyed by increased corporate dollar sales, a sign that China's export performance continued to recover in June. "Dollar supply has overwhelmed demand recently, keeping the yuan on a rising track since May," said a trader at a European bank in Shanghai.
Spot yuan stood at 6.2023 per dollar at midday, up 0.04 percent from Monday's close after it touched an intraday high of 6.1970, its strongest level since April 9. The Chinese currency gained another boost on Tuesday with new data showing China's economy stabilising after a slowdown in the first quarter. China's factory activity hit multi-month highs in June, official and private surveys showed, reinforcing signs that the world's second-largest economy is steadying as the government steps up policy support.
The official Purchasing Managers' Index (PMI), published by the National Bureau of Statistics, hit a six-month high of 51 in June, in line with market expectations and up from May's 50.8. The final HSBC/Markit purchasing managers' index (PMI) for June rose to 50.7 from May's 49.4, exceeding the 50-point level that separates growth in activity from contraction for the first time since December. China is set to announce its June trade data next week and traders expect another robust surplus. While conditions are now favourable for a stronger yuan, traders said its upside will be limited unless the central bank sends new signals that it would tolerate a resumption of the Chinese currency's appreciation.
The People's Bank of China (PBOC) set its official midpoint at 6.1523 on Tuesday, up only 0.01 percent from Monday. The first half of 2014 has been an unpleasant one for yuan speculators, as the currency has lost 2.4 percent year-to-date to become Asia's worst performer.
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