FX.co ★ Offshore Yuan Holds Three-Day Gains

The offshore yuan hovered around 7.18 per dollar on Tuesday, marking its third consecutive session of gains. This upward movement was attributed to positive data from the services sector and a stronger-than-expected PBOC reference rate, both of which bolstered market confidence. Specifically, the Caixin China General Services PMI climbed to 52.6 in July, reaching its highest level since May 2024, and exceeding forecasts of 50.2, indicating robust activity in the services sector. Additionally, the People's Bank of China set the USD/CNY midpoint at 7.1366, slightly firmer than Monday's 7.1395, continuing its strategy of establishing strong reference rates despite market predictions. The central bank permits the spot rate to fluctuate within a 2% band of this daily benchmark. In the broader economic landscape, the Politburo refrained from announcing any substantial new stimulus measures at its July meeting, shifting investor attention to forthcoming trade and inflation data for further insights into China's economic trajectory. UBS anticipates any extra policy interventions in the second half of the year will be minimal and driven by economic data, likely deployed in response to a more significant growth slowdown anticipated in the third or fourth quarter.