The Chinese yuan firmed against the U.S. dollar in Asian deals on Monday, despite verbal warnings from Chinese officials that the domestic currency's rise may be overvalued and unsustainable.

Sheng Songcheng, former director of the Survey and Statistics Department at PBOC, said that the current rapid appreciation of the yuan against the dollar may have overshot.

China should prevent huge short-term inflows, which could lift the yuan, hurt competitiveness of exporters and affect independent operations of the country's financial market and monetary policy, Sheng added.

The currency's gains come in the wake of a strong economic recovery from the pandemic and huge short-term inflows into the nation's financial market.

Survey from the National Bureau of Statistics showed that China's manufacturing sector continued to expand in May, albeit at a slower pace, with a manufacturing PMI score of 51.0.

That was shy of expectations for 51.1, which would have been unchanged from the April reading. It does, however, remain well above the boom-or-bust line of 50 that separates expansion from contraction.

The bureau also said its non-manufacturing PMI came in with a score of 55.2, beating forecasts for 54.9, which would have been unchanged from the previous month's reading.

The yuan rose to 6.3580 against the greenback, a level unseen since May 2018. The pair had ended last week's deals at 6.3674. The next possible resistance for the yuan is seen around the 6.2 level.

The People's Bank of China set today's central parity rate of the yuan at 6.3682 per dollar, compared to Friday's rate of 6.3858. 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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