U.S. President Donald Trump said he could let the March 1 deadline for a trade agreement with China "slide for a little while" if the two sides were close to a complete deal.
Although Trump said he would prefer not to push back the deadline, the market intepreted his remarks positively. The yuan has lost more than 7 percent against the dollar since last April when China imposed retaliatory tariffs on the United States.
"The spot yuan still has some momentum to trade higher," said a trader at a foreign bank. "Markets are positive to the outcome, but there remains huge uncertainty in the longer term."
Top U.S. officials arrived in the Chinese capital on Tuesday before high-level trade talks, as the world's two largest economies attempt to hammer out the deal and avoid another escalation of tariffs after March 1.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7675 per dollar, 90 pips or 0.13 percent firmer than the previous fix of 6.7765.
In the spot market, the onshore yuan opened at 6.7600 per dollar and was changing hands at 6.7570 at midday, 145 pips firmer than the previous late session close and 0.16 percent stronger than the midpoint.
Several yuan traders pointed out that the currency issue, which was on the agenda for the previous round of talks, could be one of the topics at the meeting this week.
The Trump administration had long argued that a weaker yuan gives Chinese exports a competitive advantage.
If both sides fail to reach a deal, the United States is set to more than double tariffs on some Chinese goods, dealing a sharper blow to China's slowing economy.
The global dollar index fell to 96.659 at midday, from the previous close of 96.709.
The offshore yuan was trading at 6.763 per dollar as of midday.
(Reporting by Winni Zhou and John Ruwitch; Editing by Jacqueline Wong)
