A shock improvement in Chinese factory activity supported the yuan and Australian dollar on Monday, and provided a wider lift to investors’ risk appetite, giving the dollar a lift versus the safe-haven yen.

Factory activity in China surprisingly grew for the first time in four months in March, an official survey showed on Sunday an indication government stimulus might be beginning to take hold in the world’s second biggest economy.

The official Purchasing Managers’ Index (PMI) increased to 50.5 in March from February’s three-year low of 49.2, beating economists’ median prediction of 49.5.

Investor confidence received an additional boost on Monday after a private business survey showed China’s industrial sector suddenly returned to growth in March.

The positive analyses pushed the Australian dollar, frequently seen as an investment proxy for Chinese monetary forecasts, 0.4 percent higher to $0.7126.

The Chinese yuan also gained a quarter of a percent in offshore trade to 6.707 to the dollar.

The dollar increased 0.3 percent to 111.12 yen, spreading its advance from the 1-1/2-month low of 109.70 it touched last week to 1.3 percent.

"It seems like policy support is working to underpin the Chinese economy," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.