China's currency, the yuan, has strengthened against the U.S. dollar as foreign funds flock to yuan-denominated assets betting on the country's economic recovery.

Since July 6, the yuan has gained 600 pips to below seven against the dollar, while overseas capital inflows into the Chinese A-shares in the first 11 days of July topped that of June to hit 65.37 billion yuan (about 9.34 billion U.S. dollars), according to financial information provider Wind.

Reversing pandemic-triggered retreats in March, overseas capital regained net inflows into the A-shares in April, and went on to expand over 20 percent year on year in June.

Overseas investors have also been increasing their holdings of Chinese bonds in a net amount of 322.4 billion yuan in the first six months of this year, 1.4 times that of the same period last year, data from the mutual market access scheme Bond Connect showed.

Analysts say market confidence in yuan-denominated assets was boosted by China's leading position in COVID-19 control and economic recovery.

China's economy will be among the first in the world to rebound under stepped-up recovery of economic activities, and the country's accomplishments in fighting COVID-19 also appeal to global investors, said Guan Tao, an economist with BOC International.

In its latest issue of World Economic Outlook, the IMF projected a 1-percent growth for the Chinese economy in 2020 as opposed to overwhelmingly negative figures for other economies, a nod to China's performance against the COVID-19 fallout, said Zhu Jianfang, chief economist with CITIC Securities.

IMF data also showed that the yuan's share in global forex reserves hit a record high of 2.02 percent as an increasingly global currency, another reason for its future strength, according to Cao Yuanyuan, an analyst with Golden Credit Rating International.

The yuan is expected to strengthen against a basket of currencies in the near term, buoyed by economic fundamentals and anti-cyclical measures to keep the yuan stable, as well as the interest rate gap with the United States, said Cao.

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