The Chinese yuan strengthened against the U.S. dollar in the European session on Tuesday, after China's central bank unveiled its biggest stimulus since the pandemic to support the economy and counter a prolonged downturn in the property sector.

At a press conference on Tuesday, People's Bank of China Governor Pan Gongsheng said the bank will reduce the reserve requirement ratio by 50 basis points.

He announced that the rate on seven-day reverse repo will be cut by 20 basis points to 1.50 percent and the rate on one-year medium-term lending facility by 30 basis points.

The central bank said it will lower borrowing costs and inject more liquidity into the system that would free up more money for lending.

Regulators also unveiled plans to support stable development of the stock market.

Against the U.S. dollar, the yuan rose to a 16-month high of 7.0332 from an early low of 7.1253. The yuan was trading at 7.0900 against the greenback at yesterday's close.

If the yuan extends its uptrend, it is likely to find resistance around the 6.80 region.

The Chinese central bank sets central parity rate every morning and allows the yuan to fluctuate up to 2 percent from that level.

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