Yuan hits highest level since April 2 as China holds ground

HONG KONG, April 29 (Reuters) - China's yuan rose on Tuesday to its strongest level against the U.S. dollar in nearly a month, recovering from losses sustained after the U.S. announced hefty tariffs, as Beijing signalled a commitment to currency stability.

The yuan CNY=CFXS strengthened to as much as 7.2710 per dollar in Asian trade, in strongest level since April 2, while its offshore counterpart climbed to 7.2730 CNH=, up about 0.15%.

The dollar slipped overnight after U.S. Treasury Secretary Scott Bessent told CNBC it was "up to China to de-escalate" tariffs, leaving investors unsure whether the Sino-U.S. trade war was abating.

That followed comments from the People's Bank of China Deputy Governor Zou Lan underlining a commitment to currency stability. He reiterated in a press conference on Monday that the bank would firmly correct pro-cyclical behaviours and prevent overshooting risks.

"We do not see RMB devaluation as part of China's retaliation toolkit to U.S. tariffs", analysts at HSBC said in a note.

Chinese authorities have their own motivations for preventing the yuan from depreciating "too fast and by too much", as they need to guard against capital outflow and promote trade with other partners, they said.

China has exempted some U.S. goods from tariffs and while it has advanced this year's stimulus measures to support the economy, it is holding off making additional measures, betting Washington will blink first in the trade standoff.

Before the market open, the central bank set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade, at 7.2029 per dollar, its strongest since April 7. The yuan is permitted to trade 2% either side of the midpoint.

The central bank has tightened its daily yuan official guidance for five straight business days, suggesting it is unwilling to see a sharp depreciation, analysts said.

Based on Tuesday's official guidance, the yuan is allowed to drop as far as 7.3470.

Investors are also waiting for China's April manufacturing data due on Wednesday for signs of any impact from the U.S. tariffs.

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -6.10 pips vs. offshore -6.10
• Three-month SHIBOR SHIBOR= 1.8 % vs. 3-month CNH HIBOR 1.8 %

LEVELS AT 03:11 GMT