SHANGHAI: China's onshore and offshore yuan jumped in early trade on Tuesday to their strongest level in more than two weeks, breaching a key psychological threshold and gaining more than half a percent against the U.S. dollar.

Market watchers said the sudden strengthening of the yuan followed a firmer-than-expected official guidance set by the central bank, suggesting authorities are working to stabilise the Chinese currency ahead of a key national leadership meeting next week.

Prior to market opening on Tuesday, the People's Bank of China lifted its official yuan midpoint to 6.6273 per dollar, its first firmer fixing since Sept. 22, reflecting spot yuan performance a day earlier.

The official guidance was 220 pips or 0.33 percent firmer than the previous fix of 6.6493 on Monday. The move in the midpoint was the biggest strengthening in percentage terms since Sept. 8.

However, Tuesday's stronger official fixing was even firmer than the market had forecast.

"The 9:15 a.m. (0115 GMT) official fixing was stronger than market expectations, and that has triggered an immediate reaction in the CNH," said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong.

He added that the onshore spot yuan caught up with its offshore counterpart when the domestic market opened at 9:30 a.m(0130 GMT).

Cheung noted that a slip in the U.S. dollar in early Asian trade also provided support for the yuan.

The onshore spot yuan opened at 6.5980 per dollar, breached the key 6.6 per dollar level and surging to a high of 6.5898 per dollar at one point.

As of 0303 GMT, the onshore yuan was changing hands at 6.5994, 254 pips stronger than the previous late session close and 0.42 percent firmer than the midpoint.

Its offshore counterpart traded 0.19 percent firmer than the onshore spot at 6.5871 per dollar at 0303 GMT. It hit a high of 6.5863 per dollar in early trade on Tuesday.