SHANGHAI: China's yuan edged down against the dollar on Friday but remained near recent highs amid continued tight liquidity conditions that have driven rates higher, and as the US currency held near recent highs on safe-haven buying.

The People's Bank of China (PBOC) injected a net 98 billion yuan into the financial system through its open market operations on Friday, snapping three days of net drains.

But the injection was not enough to halt a rise in short-term money rates, which rose for a fifth straight day on Friday.

"Despite the PBOC's net liquidity injection, the size was not sufficient to fill the liquidity gap across the Chinese New Year and it is too early to conclude the end of liquidity squeeze for now," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Before the market open, the PBOC set the midpoint of the yuan's daily trading band at 6.4709 per dollar, firmer than the previous fix of 6.4845.

Even so, spot yuan opened at 6.4530 per dollar and weakened to 6.4631 by midday, 131 pips softer than Thursday's late session close.

The offshore yuan weakened to 6.478 per dollar from a close of 6.4761, even as overnight offshore yuan borrowing rates hit their highest level since June 2017.

Traders said the yuan and the dollar index remained range-bound for the time being, but the dollar could strengthen as the implementation of US stimulus boosts activity in the world's largest economy.

"In the near term the yuan is likely to continue to fluctuate and remains relatively steady. But a turnaround may be brewing, and its previous one-way appreciation trend may change," said a trader at a Chinese bank.

The global dollar index rose to 90.743 from the previous close of 90.564 on Friday, having risen this week on safe-haven buying, with investors concerned that US President Joe Biden's stimulus package may be smaller than the proposed $1.9 trillion.