China's yuan dipped on Friday, but is set for a 12th week of gains in its longest winning streak in 13 years, as exporters rushed to bring home receipts from booming trade ahead of the Lunar New Year.
Some analysts also see the rising yuan and China's buoyant stock market feeding each other, but say the central bank has enough tools up its sleeves to forestall the currency appreciating too quickly.
The onshore yuan changed hands at 6.9068 per dollar around noon, slightly weaker than the previous session's close of 6.9033. The dollar index rebounded 0.03 percent in Asian trade.
For the week, the yuan has gained roughly 0.4 percent in its best weekly performance this year. It also marked the longest run of weekly gains since late 2012.
The recent spurt, which sent the yuan to its firmest level in 33 months on Thursday, was partly fueled by seasonal dollar selling, but the People's Bank of China (PBOC) appears not in a hurry to step into the market directly, Caitong Securities said in a note.
History shows that the PBOC "has a rich toolkit, and can act with precision and restraint to easily cope with possible overshooting."
Reflecting its intention to slow the pace of yuan appreciation, the PBOC set the daily guidance rate at 6.9398 per dollar, 350 pips weaker than Reuters estimate. The spot yuan is allowed to trade a maximum of 2 percent either side of the fixed midpoint each day.
Topsperity Securities said that the yuan's strength is also lending support to Chinese stocks.
Trading typically thins ahead of the Spring Festival holiday, but the stock market has held at a relatively high level "without pulling back", the brokerage said in a report.
"The recent strength in yuan's exchange rate is contributing to the stock market resilience."
Reuters
