SHANGHAI: The yuan strengthened against the dollar on Tuesday, taking its cue from central bank guidance that lifted the official midpoint after the dollar index backed away from a sustained rally.
While trading volumes were much stronger than they were in Monday's morning session, clocking over $4 billion by midday, trading remained tightly range-bound between 6.2237 and 6.2221 yuan per dollar.
Yuan bulls base their appreciation call on record-high foreign-exchange purchasing by Chinese banks in January, saying it suggests strong market appetite for yuan.
Chinese banks bought more foreign currency from clients than they sold in January, taking a net $92.6 billion in foreign exchange off corporate sellers for yuan, according to Reuters calculations from official data.
Bears say China will be unable to maintain its currency at current levels if neighboring currencies continue to depreciate, with some citing the weak manufacturing purchasing managers' index reading in February, which was unusual given the seasonal bump the index usually gets from the lunar new year holiday.
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