China's offshore yuan extends gains as US drops manipulator label, strongest since July

SHANGHAI, Jan 14 (Reuters) - China’s offshore yuan extended strong gains to the dollar on Tuesday morning to a 5-1/2-month high, supported by rising optimism towards Sino-U.S. trade developments.

The offshore yuan surged to a high of 6.8745 per dollar, the firmest level since July 26, and was at 6.8759 as of 1235 GMT. The offshore yuan has strengthened nearly 0.6% so far this week.

Strength in the yuan came as the U.S. Treasury Department on Monday dropped its designation of China as a currency manipulator days before top officials of the world’s two largest economies were due to sign a preliminary trade agreement to ease an 18-month tariff war.

Onshore spot yuan trade starts at 9:30 Beijing time/0130 GMT.

Reporting by Winni Zhou and Andrew Galbraith; Editing by Kim Coghill