The Chinese yuan edged slightly lower on Friday but remains on track for its twelfth consecutive weekly gain, marking its longest weekly rally in 13 years.
The currency has been supported by strong export inflows as exporters accelerate the repatriation of overseas earnings ahead of the Lunar New Year holiday.
The onshore yuan traded at 6.9068 per US dollar near midday, marginally weaker than the previous session’s close of 6.9033. Meanwhile, the US dollar index posted modest gains during Asian trading.
Despite Friday’s slight pullback, the yuan has risen nearly 0.4% this week, making it its strongest weekly performance so far this year and its longest streak of weekly gains since late 2012.
Analysts at Caitong Securities said the recent rally, which pushed the yuan to its strongest level in 33 months on Thursday, was partly driven by seasonal dollar selling. They added that the People’s Bank of China (PBOC) does not appear to be in a rush to intervene directly in the market.
The central bank retains multiple policy tools that allow it to manage excessive exchange rate movements with precision and flexibility, the firm noted.
In a move seen as an attempt to temper the pace of appreciation, the PBOC set Friday’s daily reference rate at 6.9398 per dollar, around 350 pips weaker than market estimates. The yuan is allowed to trade within a ±2% band around the official fixing each day.
Meanwhile, Topsperity Securities said the yuan’s strength has helped support Chinese equities, which have remained relatively elevated despite the typical decline in trading volumes ahead of the Spring Festival holiday.
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