FX.co ★ Offshore Yuan Approaches 33-Month High

On Monday, the offshore yuan appreciated to approximately 6.95 per dollar, recovering from the losses of the previous week and nearing its highest value in nearly three years. This movement was bolstered by robust manufacturing PMI data, which improved market sentiment. According to a private survey, China's factory activity expanded at its fastest rate since October, with the PMI rising from 50.1 in December to 50.3 in January. This growth was attributed to accelerated production and strategic shipment advancement ahead of the prolonged Lunar New Year holiday. The private data contrasted with official figures, which indicated contraction. Collectively, these statistics provided a cautiously optimistic outlook for the world's second-largest economy at the year's outset, despite ongoing concerns about potential deflation. Concurrently, demand for foreign exchange settlement remained robust ahead of the holiday period, supported by the central bank's careful daily rate guidance, which lent continued backing to the yuan. The market is now focused on the release of further private PMI readings this week and upcoming inflation data next week.