China's yuan strengthened against the U.S. dollar on Wednesday and was on track for its seventh consecutive quarterly gain, supported by increased dollar selling by exporters and improved sentiment following stronger factory activity data, according to a report by Reuters.
The onshore yuan opened at 6.7050 per dollar and was last trading at 6.7047 as of 0221 GMT, up 18 pips from the previous session's close, Reuters reported.
The Chinese currency has maintained an upward trajectory since late 2023, helped by robust exports, increased foreign exchange settlement and broad-based weakness in the dollar.
The yuan has gained about 0.2% against the dollar this month and is up 4.3% so far this year.
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Exporters step up dollar conversion
Market participants said exporters increased the conversion of their dollar holdings into yuan ahead of China's week-long National Day holiday, which begins on Thursday. Onshore yuan trading will resume on October 8.
The report stated that foreign exchange settlement flows have been a key driver of the yuan's appreciation this year, with companies increasingly converting retained foreign currency into yuan as holding dollars has offered limited relative benefit.
Before the market opened, the People's Bank of China set the yuan's midpoint rate at 6.7351 per dollar, its strongest level since February 2, 2023. The fixing was 326 pips weaker than the Reuters estimate.
The onshore yuan is permitted to trade within a 2% range on either side of the central bank's daily midpoint.
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Factory data lifts sentiment
Investor sentiment also improved after data showed China's factory activity returned to growth in September. The recovery was supported by easing weather-related disruptions, which allowed factories to resume operations, while strong global demand linked to artificial intelligence also provided support to the industrial sector, the report stated.
Markets were also assessing measures announced by Beijing on Tuesday aimed at directing cheaper credit towards sectors including infrastructure and technology, while expanding support for home buyers.
Investors are watching whether the latest measures will be followed by additional policy support to strengthen economic growth and sustain the recovery.
Offshore yuan also gains
The offshore yuan was trading at 6.7055 per dollar, up around 0.03% in Asian trading.
The yuan's sustained appreciation comes as exporters' foreign exchange conversion, stronger external trade flows and weakness in the U.S. currency continue to provide support, while investors assess the impact of China's latest economic stimulus measures.
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