SHANGHAI/SINGAPORE, July 11 (Reuters) - China's yuan jumped to over two-week highs on Tuesday, breaching a key threshold, after the central bank continued to set a firmer-than-expected midpoint fixing, while extended policy support for the troubled property sector also buoyed sentiment.
The Chinese currency, in both onshore and offshore trade, strengthened past the psychologically important 7.2 per dollar level.
Some currency traders said the breach of the key level prompted some stop-loss orders on their long dollar positions, helping to accelerate yuan gains.
The onshore yuan rose to a high of 7.1934 per dollar at one point, the strongest level since June 21. It last traded at 7.1989 as of 0710 GMT.
Its offshore counterpart followed suit and strengthened to a high of 7.1950, the strongest level since June 26. It last traded at 7.2020.
The strong rally comes as China's central bank on Monday extended a rescue package to shore up the real estate sector, which is struggling to gain traction despite a range of measures aimed at easing a liquidity crunch that has plagued it since mid-2020.
The move "could be a signal that more property easing is coming," said Larry Hu, chief China economist at Macquarie.
"Looking ahead, we expect to see more easing on the demand side, such as lowering the down-payment ratio and easing purchase restrictions."
Christopher Wong, FX strategist at OCBC Bank, said he's expecting some form of fiscal stimulus, after the central bank lowered key policy rates in June.
"A potential timeline to look forward to is between now and the Politburo's semi-annual economic conference at end-July for any major announcement," Wong said.
Separately, the People's Bank of China (PBOC) set the midpoint rate at a new three-week high of 7.1886 per dollar, 40 pips firmer than the previous fix of 7.1926.
The official guidance rate also continued to be set much stronger than market projections, traders and analysts said, which they see as a sign of Beijing's increasing discomfort with recent yuan weakness.
Tuesday's official midpoint was 291 pips stronger than Reuters' estimate of 7.2177.
Traders and analysts said their attention will be on upcoming economic data to gauge the health of the broader economy, which remains the key to determine the yuan's value.
"Exports are expected to decline for the second straight month amid soft external demand while imports should continue contraction," pointing to insufficient domestic consumption, said Lin Li, head of global markets research for Asia at MUFG Bank.
Over the near term, weak economic data along with widening interest rate differentials over the U.S will continue to weigh on yuan sentiment, she said.
Li expects the central bank to roll out more policy measures to dampen yuan depreciation expectations.
China is due to release June trade and credit lending data this week.
A Reuters survey showed that China's new yuan loans were expected to have risen further in June after nearly doubling in May, as the central bank kept policy accommodative to bolster a faltering economic recovery.
(Reporting by Winni Zhou and Tom Westbrook Editing by Shri Navaratnam)
