Yuan strengthens: The yuan achieved a 1-1/2 month high against a weakening dollar on Tuesday, driven by anticipations of a dovish stance from the US Federal Reserve. 

Speculation regarding potential rate cuts by June gained traction last week, spurred by remarks from Fed Chair Jerome Powell.

Ahead of market opening, the People's Bank of China (PBOC) established the midpoint rate, around which the yuan trades, at 7.0963 per dollar. This marked the strongest level since January 2 and surpassed market projections, reflecting the central bank's persistent strengthening bias in setting the rate.

According to traders, expectations for the yuan remained anchored by consistent guidance on yuan fixing by the PBOC. 

The policy provided protection against upside risks for USD/CNH, reducing demand for buying USD/CNH call options.

In the spot market, the onshore yuan opened at 7.1750 per dollar and climbed to 7.1741, its highest level since January 31. 

By midday, it was trading at 7.1768, showing strength compared to the previous session close.

Market attention now turns to crucial US inflation data scheduled for later, offering insights into the rate outlook for the world's largest economy. 

This data could influence the dollar and other major currencies.

By midday, the global dollar index fell to 102.82 from the previous close, while the offshore yuan was trading at 7.1817 per dollar. 

Investors also monitored China's National Party Congress (NPC) conclusion, where no major surprises in economic policy were observed, despite perceived modest fiscal stimulus.

(With Reuters Inputs)