SHANGHAI: China’s yuan firmed against a weakening US dollar on Thursday, as the dollar index fell in late session on Wednesday to the lowest level in five months.

The dollar index broke lower in the late session on Wednesday as 10-year US treasury fell below 3.8%, for the first time in five months.

“There is no point fighting the dollar downside momentum at this point given the low market volumes,” said Alvin Tan, head of Asia FX strategy at RBC Captial Markets.

For the yuan to strengthen, there needs to be more evidence of economic recovery, foreign inflows, and broad US dollar weakness, UBS analysts said in a note. Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0974 per US dollar, 28 pips firmer down than the previous fix 7.1002.