SHANGHAI, July 1 (Reuters) - China's yuan remained
largely steady against the U.S. dollar on Monday after a private
sector survey showed China's manufacturing activity grew at the
fastest pace in more than three years.
    The Chinese currency also stabilised due to a weakened U.S.
dollar after data showed inflation in the world's largest
economy subsided last month, cementing expectations the Federal
Reserve will start cutting interest rates this year.

By 0312 GMT, the yuan was 0.01% lower at 7.2678
to the dollar after trading in a range of 7.2665 to 7.2685.
    However, the yuan still hovered around seven-month lows and
was down 2.3% for this year.
    It has been under pressure since early 2023 as a prolonged
property crisis, anaemic consumption and falling yields drive
capital flows out of China, and foreign investors stay away
from its struggling stock market.
    Prior to the market opening, the People's Bank of China set
the midpoint rate, around which the yuan is allowed
to trade in a 2% band, at 7.1265 per dollar, 1,293 pips firmer
than a Reuters' estimate.
    The spot yuan opened at 7.2665 per dollar and was
last trading 19 pips lower than the previous late session close
and 1.98% weaker than  the midpoint.
    The Caixin/S&P Global manufacturing PMI rose to 51.8 in June
from 51.7 in the previous month, marking the fastest clip since
May 2021 and surpassing analysts' forecasts of 51.2, indicating
the health of the sector remained robust. 
    However, the figure contrasted with an official PMI released
on Sunday that showed a decline in manufacturing activity,
keeping alive calls for further stimulus as the economy
struggles to get back on its feet.
    China's investment bank CICC said in a note that the yuan
will face continued pressure against the U.S. dollar in the near
term and expected a mild depreciation of the domestic currency.
    "However, the policy to maintain the yuan forex rate will be
strengthened as the Third Plenum comes," CICC added.
    The meeting of the Chinese Communist Party's central
committee in July will focus on deepening reforms and promoting
the country's modernisation. Investors expect it will provide a
better sense of the leadership's medium-term reform priorities.
        In the U.S., data showed the personal consumption
expenditures (PCE) price index, the Fed's preferred inflation
measure, was unchanged last month, and followed an unrevised
0.3% gain in April.
    Investors will now focus on next week's U.S. nonfarm
payrolls report, in which Wall Street economists are forecasting
a gain of 195,000 in June, compared with 272,000 in May.
    China's central bank has been gradually lowering its daily
yuan official guidance, well within market projections but with
a bias suggesting it is allowing some depreciation, traders and
analysts said. 
    Based on Monday's official guidance, the yuan is allowed to
drop as far as 7.2690.
    The offshore yuan traded at 7.2998 yuan per dollar,
up about 0.01% in Asian trade.
    The dollar's six-currency index was 0.123% lower at
 105.59. 
 
Key onshore vs offshore levels:
    * Overnight dollar/yuan swap onshore -7.70 pips 
    * Three-month SHIBOR 1.9% vs. 3-month CNH HIBOR 3%

LEVELS AT 03:11 GMT GMT
 INSTRUMENT   CURRENT    UP/DOWN(-)    % CHANGE    DAY'S HIGH  DAY'S 
              vs USD     VS. PREVIOUS  YR-TO-DATE              LOW
                         CLOSE %                               
 Spot yuan    7.2678     -0.01         -2.28       7.2665      7.2685