China's yuan strengthed against the dollar on Friday, the last trading day before a week-long Labour Day holiday, as the US currency continued to lose ground globally.
The yuan closed at 8.0140 to the dollar, versus Thursday's close of 8.0161. China's central bank said the yuan's mid-point was at 8.0165 on Friday, stronger than 8.0205 on Thursday.
On the global front, the dollar fell to a fresh seven-month low against the euro on Friday, building on losses after Federal Reserve chief Ben Bernanke gave the clearest signal yet that interest rates may be near a peak.
"A weak US currency helped push up the yuan once again today," said a Shenzhen-based trader. "Dollar selling has been strong throughout the day."
Others say political pressure might have a role in strengthening the yuan after the US renewed its call for a more flexible Chinese forex policy, while acknowledging Beijing's latest interest rate hike as a "positive sign".
China's central bank took global markets by surprise on Thursday when it raised its benchmark one-year lending rate to 5.85 percent from 5.58 percent, the first such move in 18 months.
Treasury Department spokesman Tony Fratto referred to the hike as "another example" of Beijing using market instruments to handle its economy, but urged greater flexibility in its currency at the same time.
The yuan has now appreciated a further 1.2 percent since it was revalued by 2.1 percent against the dollar last July and freed from a dollar peg to float within managed bands.