The yuan gained slightly against the dollar on Tuesday, supported by a robust official guidance rate and persistent corporate demand for the Chinese currency.

The People’s Bank of China (PBOC) set the yuan’s daily fixing at a stronger-than-expected level, signaling its intent to maintain stability. This move encouraged market participants and contributed to the upward pressure on the yuan.

Corporate demand for yuan, driven by trade settlements and investment flows, further bolstered the currency’s performance. Exporters converting their dollar earnings into yuan added to the buying pressure.

However, the trading range remained narrow as investors exercised caution ahead of key economic data releases later in the week. Market participants are closely monitoring inflation figures and trade data for further clues about the direction of the Chinese economy.

Analysts expect the yuan to remain relatively stable in the near term, with the PBOC likely to intervene to prevent excessive volatility. The central bank’s commitment to a stable currency is seen as crucial for maintaining investor confidence and supporting economic growth.

Despite the day’s gains, some analysts noted that the yuan’s appreciation has been gradual compared to other emerging market currencies. They attributed this to the PBOC’s cautious approach and its desire to avoid disrupting trade flows.

Looking ahead, the yuan’s trajectory will likely depend on a combination of factors, including China’s economic performance, global market conditions, and the PBOC’s policy decisions.