The yuan rose for the four consecutive day as the market lost some of its pessimism.
It is believed to be supported by expectations of an improved economy to the end of the year and an inflow of money as foreign investors buy onshore bonds.
Investment and consumption will both rebound toward the year's end, say economists surveyed by Bloomberg. Foreign investors are continuing to pour cash into onshore bonds despite the yuan's weakness in the past few months, says data from ChinaBond.
In addition, the People's Bank of China is expected to continue monetary easing, which should help support the economy with cheaper money.
In the short run though, with the US raising rates, there's a risk that the stimulus may weaken the currency and make yuan assets less attractive relative to those denominated in the dollar.
The onshore yuan rallied 0.20 percent to 6.8180 per dollar last night, while the offshore rate was little changed.
The National Bureau of Statistics said yesterday China's consumer price index rose 2.1 percent year on year in July, higher than the expected 2 percent, mainly driven by rising non-food prices.
The CPI climbed 0.3 percent month on month. Non-food prices increased 2.4 percent yearly. China is aiming to keep annual CPI growth at around 3 percent this year, the same as the target for 2017.
Medical and health-care prices grew 4.6 percent, and transport and communications prices gained 3 percent. Costs of accommodation rose 2.4 percent, while educational, cultural and recreational prices increased 2.3 percent.
Food prices went up 0.5 percent year on year and edged up 0.1 percent month on month. The price of pork dropped 9.6 percent year on year, dragging down CPI growth by 0.24 percentage points.
The producer price index rose 4.6 percent year on year in July, slightly down from the 4.7-percent increase in June.