SINGAPORE: The yuan headed for its sharpest gain in two weeks on Monday, riding a wave of broad dollar selling as investors bet on US rate cuts, but slid against a resurgent yen.

China’s currency climbed as far as 7.1314 per dollar during afternoon trade and was last about 0.4% firmer at 7.1363, its largest one-day rise since early August.

The rally puts the yuan back in the middle of its daily trading band - after months at the low end - though that is mostly thanks to a weakening dollar rather than improving sentiment.

Yen gains continued to squeeze the yuan against a basket of trading partners’ currencies, where it hit 98.07, the lowest level since Jan. 15, according to Reuters calculations from official data. The yuan fell 1% to 20.38 yen, its heaviest drop since August 5.

Traders are looking ahead to China’s loan prime rate settings on Tuesday against a backdrop of cratering bank lending, falls in home prices and economic gloom that analysts think will keep the currency from gaining much further.

The yuan “is unlikely to benefit much from a decline in the US dollar driven by an improving global economy,” they added.