China's yuan hovered near a 3-1/2-year high against the dollar on Friday as it headed for a seventh straight weekly gain, aided by a firmer midpoint fixing and fading expectations for a rate hike by the US Federal Reserve in September.
The spot yuan was 0.01 percent higher at 6.7443 to the dollar by 0258 GMT, after trading in a range of 6.7420 to 6.7483.
The currency hit 6.74 per dollar in the previous session, its strongest since February 2023.
Prior to the market opening, the People's Bank of China set the midpoint rate at 6.7878 per dollar, its strongest since February 8, 2023 and 465 pips weaker than a Reuters' estimate. The spot yuan is allowed to trade 2 percent either side of the fixed midpoint each day.
"Despite softer Chinese growth momentum in the second quarter, the PBOC has continued to guide USD/CNY lower through its daily fixing rate, helping to anchor CNY strength," Lloyd Chan, senior currency analyst at MUFG Bank, said in a note.
External factors are also giving the yuan a boost. US producer prices were unchanged in July, bolstering market expectations that the Fed could leave interest rates unchanged next month.
Dimming rate hike odds could weigh on the dollar and support emerging-market currencies, including the yuan, analysts said.
"If the labour market and inflation data continue to surprise on the downside, short-term yield differentials could narrow and weaken the greenback," Alpine Macro currency strategist Harvinder Kalirai said in a note.
The yuan is up 0.6 percent against the dollar this month, and 3.7 percent firmer this year.
China's central bank injected 349 billion yuan (HK$406.1 billion) into the banking system via overnight reverse repos on Friday, with no seven-day reverse repos for a fourth consecutive day, as its focus shifts toward managing overnight funding costs.
The offshore yuan traded at 6.7457 yuan per dollar, down about 0.01 percent in Asian trade.
The dollar's six-currency index was at 99.92.
Reuters
