Updates to domestic session close
By Jiaxing Li
HONG KONG, Feb 26 (Reuters) - China's yuan firmed to a near three-year high against the U.S. dollar on Thursday despite the central bank's signal aimed at curbing the currency's rapid gains, as seasonal settlement demand continued to underpin a sustained rally.
The yuan CNY=CFXS finished the domestic session at 6.8397, the strongest such close since March 23, 2023.
Its offshore counterpart strengthened past the 6.83 level per dollar CNH= during the session, also near the strongest in three years.
The yuan is now up 0.9% against the dollar this week, set to register its 13th straight week of appreciation, supported by a confluence of positive factors including broad U.S. dollar weakness, seasonal export settlement demand and the buoyant performance of the domestic equity market.
"This round of exporter settlement wave may not just be a short-term spike," analysts at GF Securities wrote in a note. "'Converting on strength' is gradually becoming corporate consensus," they said, referring to exporters converting their dollar receipts into yuan during the currency's ongoing rally.
Still, the yuan is unlikely to be on a one-way street of sustained gains this year, as currency stability remains the main policy tone and settlement demand is set to ebb after the Lunar New Year, they added.
Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 6.9228 per dollar, its strongest since May 11, 2023.
It also came in 623 pips weaker than a Reuters estimate, the biggest spread on record. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The central bank has been gradually strengthening its daily yuan official guidance but at levels weaker than market projections, signalling its measured approach towards the yuan gain, traders and analysts said.
"The current fixing pattern suggests a calibrated approach —allowing gradual currency appreciation while smoothing volatility — rather than signalling a policy shift to cap gains," Wee Khoon Chong, APAC Macro Strategist at BNY said in a note.
"There remains scope for further CNH strength" underpinned by improving domestic sentiment, stabilising macro expectations, and continued foreign inflows, he added.
Elsewhere, the dollar's six-currency index =USD was steady at 97.52, as uncertainty persisted over how U.S. President Donald Trump would respond to the Supreme Court's ruling on February 20 that struck down his emergency tariffs.
Key onshore vs offshore levels:
Overnight dollar/yuan swap onshore -3.95 pips vs. offshore -3.95
Three-month SHIBOR SHIBOR= 1.6% vs. 3-month CNH HIBOR 1.7%
(Reporting by Jiaxing Li in Hong KongEditing by Shri Navaratnam and Peter Graff)
((Jiaxing.Li@thomsonreuters.com; +852 34627725;))