SHANGHAI: China's yuan inched up on Friday, as Beijing vowed to continue to support its economy, though the currency was on track for its sixth week of losses due to a strengthening dollar and tensions between China and the West.

The central bank said on Thursday China will maintain credit support continuity and stability for small and micro firms.

The People's Bank of China set the midpoint rate at 6.5376 per dollar prior to market open, 94 pips weaker than the previous fix of 6.5282.

The spot market opened at 6.5400 per dollar and was changing hands at 6.5428 at midday, 47 pips firmer than the previous late session close.

The offshore yuan was trading at 6.5426 per dollar.

A rebound in the A-share market on Friday also helped underpin the yuan, as foreign investors bought shares via the Stock Connect linking mainland and Hong Kong.

But traders said a higher dollar index, underpinned by optimism around a US economic recovery and COVID-19 vaccinations progress, could put pressure the yuan and other currencies.

"The yuan could weaken to the 6.6 per dollar level given the recent strength in the dollar," said a trader at a foreign bank.

Another trader at a Chinese bank said increasing seasonal dollar purchase at the end of the quarter could also weigh on the yuan.

The dollar traded near multi-month highs against most major currencies on Friday, supported by a wave of optimism over improving US economic data, the rollout of coronavirus vaccines, and rising Treasury yields.

If the onshore yuan finishes the late night session at the midday level, it would have dropped 0.5% against the dollar over the week, its sixth straight week of declines.

Tensions between China and the West continued to weigh on the Chinese currency.

US President Joe Biden on Thursday said he would prevent China from passing the United States to become the most powerful country in the world, vowing to invest heavily to ensure America prevails in the race between the world's two largest economies.

China sanctioned organisations and individuals in the United Kingdom on Friday over what it called "lies and disinformation" about Xinjiang.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 96.94, weaker than the previous day's 97.01.

Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.7251, 2.79 percent away from the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.