China’s yuan climbed past the psychological milestone of 7 per dollar for the first time since September 2024, on bets the central bank will allow a gradual appreciation to boost market confidence.

The offshore yuan gained as much as 0.1% to 6.9985 per dollar on Thursday. The move came after the People’s Bank of China strengthened its daily reference rate to the strongest level since September 2024.

The yuan is headed for its best year in half a decade against the dollar, thanks to a slump in the US currency, inflows chasing China’s stock-market rebound and easing geopolitical tensions. Beijing has been guiding the yuan stronger at a carefully orchestrated pace with its fixing in the past few months as it seeks to allow currency appreciation without triggering foreign-exchange volatility.

Despite its rally versus the dollar, many argue the yuan is still too cheap on a trade-weighted basis and considering China’s entrenched deflation. Goldman Sachs Group Inc. said the currency was 25% undervalued relative to economic fundamentals.