(Bloomberg) -- The yuan headed for the first back-to-back gain in six weeks after two manufacturing gauges topped the most optimistic economist estimates and a central bank official stepped up verbal defense of the currency.
The exchange rate climbed 0.07 percent to 6.7736 per dollar as of 5:26 p.m. in Shanghai, adding to Monday's 0.04 percent advance. The yuan dropped 1.5 percent last month, the most since May, as rising bets for higher U.S. borrowing costs bolstered the greenback and the central bank cut its reference rate.
The nation's official factory gauge rose to the highest since July 2014 in October, while the private Caixin version of the index came in at 51.2. There's no basis for persistent depreciation as the nation's economy is generally stable with positive progress in structural reforms, People's Bank of China Deputy Governor Pan Gongsheng said in a meeting with Carlyle Group Co-CEO William Conway.
"We haven't seen such good data for a while and they are good news for the yuan -- they suggest the economy has picked up due to strong domestic consumption," said Irene Cheung, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. "Today's data support the argument for limited monetary easing in the near future, which will also help alleviate depreciation pressures."
While there's limited room for further weakening by the end of this year as 6.8 per dollar will be a floor, policy makers will guide the currency gradually lower in 2017 to support the economy, Gao Qi, a foreign-exchange strategist at Scotiabank, wrote in a note Tuesday.
The offshore rate dropped 0.06 percent to 6.7815 per dollar.
To contact Bloomberg News staff for this story: Tian Chen in Beijing at tchen259@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net.
With assistance from Tian Chen
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