However, traders said customers remain skeptical about medium-term prospects for the yuan this year, given widespread areas of economic uncertainty both in China and abroad, which has kept transaction volumes - particularly purchases of dollars - relatively low.
Traders said the yuan has become more responsive to market forces, but added that the central bank continues to play a moderating role in the yuan's movements.
"Given current economic trends, regulators cannot let the market continue to produce forecasts for depreciation; stability and confidence are also important," said a trader at a Chinese bank in Beijing.
The yuan recorded its largest one-month drop in history against the dollar in May, losing nearly 1 percent, as the European crisis prompted global investors to move into safe-haven assets such as the dollar and US Treasuries.
The yuan continues to trade near a 10-year high against the euro, which could pose a problem for Chinese exporters. Europe accounts for around one-fifth of Chinese exports.
The central bank set the yuan midpoint at 6.3170 on Thursday, resuming a trend of stronger midpoints that began Friday last week but was interrupted on Wednesday when the bank let the currency weaken slightly.
Spot prices continued to trade weaker than the midpoint in a narrow price range. Spot yuan was trading at 6.3608 per dollar in the early afternoon, only 52 pips away from the opening price.
Global currency markets are awaiting an appearance by US Federal Reserve Chairman Ben Bernanke before a congressional panel on Thursday. Investors are hoping Bernanke will clarify whether the Fed plans to bolster economic recovery with another round of quantitative easing.
Yuan 1-year non-deliverable forwards continued to inch closer to the onshore spot. The spread has narrowed by over a basis point over the course of the week, but at 6.4120 continues to imply mild depreciation this year.
The offshore yuan (CNH) continues to hover slightly below the onshore spot, which may be related to tightening liquidity in the CNH market. The supply of offshore yuan continued to contract in April, and has now shrunk for five consecutive months.