BEIJING: Sustained demand continued to support the Chinese yuan on Friday, putting it on course for the third straight weekly gain, despite Russia's invasion of Ukraine roiling global financial markets.
Corporates converting foreign currency earnings and heavy foreign inflows into Chinese assets have underpinned the yuan, as it climbed its strongest level since August 2015 against major trading partners.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3346 per dollar, weaker than the previous fix of 6.328.
Friday's fix largely matched market projections. Traders said it signalled that the central bank remains comfortable with yuan's strength for the time being.
Fear that the Ukrain conflict could worsen has driven up the safe-haven dollar and oil prices, putting pressure on most other emerging market currencies.
China's yuan weakens as Ukraine escalation rattles sentiment
The spot yuan opened at 6.3230 per dollar and was changing hands at 6.3172 at midday, 127 pips firmer than the previous late session close.
If it finishes the late night session at the midday level, it would have gained 0.13% against a soaring dollar for the week.
"The RMB's status as a safe-haven is still debatable but the huge Chinese domestic market and more complete supply chain should help cushion the economy against external shocks," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
"Moreover, the PBOC's preference to keep liquidity conditions ample sent a signal that the easing cycle is still underway. If the PBOC's easing bias is proved to be broad-based, the central bank should retain its FX policy stance to curb one-way RMB appreciation bias."
Cheung referred to the PBOC's move to inject a net 760 billion yuan into the banking system for the week, the biggest in more than two years, to help tide over month-end higher cash demand.
Some traders also said they were on guard for any verbal warning from Chinese officials to rein in the yuan strength as the spot price was nearing the psychologically important 6.3 per dollar level.
By midday, the global dollar index stood at 96.878, while the offshore yuan was trading at 6.3167 per dollar.