The yuan rose for a second day on optimism China will step up efforts to strengthen the economy amid signs a slowdown in growth is deepening.

A preliminary reading for July of the Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics was 47.7, below June’s final level of 48.2, according to a report today. A reading below 50 indicates contraction. The Bloomberg Dollar Index, which tracks the greenback against 10 major currencies, extended gains to 0.16 percent after the flash PMI data release. China approved three asset managers in Hong Kong as yuan qualified foreign institutional investors in June.

“China’s slowdown has probably been mostly priced in and there are indications officials will accelerate financial reforms,” said Banny Lam, the Hong Kong-based co-head of research at Agricultural Bank of China International Securities Ltd. “Further liberalization of the capital account will be positive for the yuan.”

The currency rose 0.03 percent to 6.1354 per dollar as of 10:31 a.m. in Shanghai, China Foreign Exchange Trade System prices showed. The People’s Bank of China raised the reference rate by 0.01 percent to 6.1695 per dollar today. The currency is allowed to diverge a maximum 1 percent on either side of the daily fixing. The spot rate has advanced 0.38 percent from a two-month low of 6.1586 reached on July 15.

The Philippines is looking to diversify its currency reserves and will consider the yuan if it becomes a convertible currency, the nation’s central bank Governor Amando Tetangco told reporters in Manila late yesterday.

‘Loss of Confidence’

“We maintain a view for the recent yuan appreciating trend to be unsustainable,” Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA, wrote in a note today. “Increasing loss of confidence in China is likely to lead to the steepening of the yuan’s NDF curve.” Chong expects the currency to end the year at 6.17 per dollar.

In Hong Kong’s offshore market, the yuan climbed 0.01 percent to 6.1349 per dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards were little changed at 6.2730, following a three-day gain of 0.13 percent. The contracts traded at a 2.2 percent discount to the onshore rate.

One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, was unchanged at 1.5 percent today.