* Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E
* Yuan at highest levels since March 18 vs. USD (New throughout; changes dateline; previous LONDON)
By Kate Duguid
NEW YORK, July 6 (Reuters) - The yuan on Monday was on track for its best day against the dollar since December as investors lapped up risky assets on growing expectations of a strong Chinese economic rebound and as glimmers of good news in U.S. data drove down demand for the safe-haven dollar.
An index of blue-chip Chinese shares soared to its highest in five years as traders bet on a revival in China, pushing the offshore yuan up 0.75% to its highest level since March 18 and on track for its best daily performance since Dec. 12. It was last at 7.015 yuan per dollar.
“The rally in mainland China equities has been the big catalyst,” said Stephen Gallo, European head of FX strategy at BMO Financial Group.
“The only caveat is that China’s economy not driven purely by free-market forces. But if regulators in China are engineering a stronger equity market, it can still feed through to the rest of the world.”
A broad-based risk-on move also weakened the U.S. dollar. Against a basket of six rival currencies, it was last down 0.42% at 96.76, having earlier hit its lowest since June 24.
Monday’s move followed a significant technical event on Friday called a death cross - in which the dollar index’s 50-day moving average crossed below its 200-day moving average - indicating the potential for a sell-off.
“It signals that you’re seeing positive sentiment taking hold... on the back of a more positive view of the global economy,” said Charles Tomes, portfolio manager at Manulife Investment Management.
Contributing to the morning’s risk-on move was a report that U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels. A resurgence in coronavirus cases, however, has forced some restaurants and bars to close again, threatening the emerging recovery.
The euro rose to a two-week high of $1.1345, supported by the positive sentiment about a revival in Chinese economic activity as well as strong data. German industrial goods production rose by 10.4% in May, rebounding from their biggest drop since records began in 1991 and the bloc’s retail sales figures rose above pre-coronavirus levels in some countries.
Reporting by Kate Duguid in New York and Thyagaraju Adinarayan in London; Editing by Dan Grebler