HONG KONG: China's yuan rose to a two-week high on Wednesday in spite of a weaker midpoint, as the outlook on the currency has gradually improved on a recovering economy and hopes of further stimulus.
Spot yuan changed hands at 6.1991 per dollar near midday, up 0.07 percent from Tuesday's close of 6.2037. It touched 6.1976 in morning trade, the highest level since July 10.
The People's Bank of China (PBOC) fixed the official midpoint at 6.1572, down 0.05 percent from the previous day's 6.1544.
"Demand to sell dollars was quite strong in the morning, partly because too many long dollar positions were built in the past few days," said a trader at a Chinese bank in Shanghai.
The yuan turned subdued this year after the central bank engineered an unexpected sharp decline in the currency to shake out speculative money and prepare for further market reforms in February.
It has lost 2.3 percent against the dollar since the start of the year, the worst performing currency among its emerging market peers.
However, market appetite to accumulate the redback has returned as the world's second-largest economy grew slightly faster than expected in the second quarter due to a burst of government support.
Some analysts have revised up their forecasts on China's economic growth this year, including ANZ, which lifted its gross domestic product estimate for 2014 to 7.5 percent from 7.2 percent.
"We believe that further monetary policy easing across the board (i.e. RRR cut to the rest of the banking system) is still needed for Premier Li Keqiang to deliver the 7.5 percent growth target," ANZ analysts said in a report.
The yuan is rebounding as the economy stabilises and China faces pressures on capital inflows in the second half of the year, Guan Tao, the head of the department of international payments at the State Administration of Foreign Exchange (SAFE), told a news conference on Wednesday.
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