SHANGHAI: China’s yuan was steady against the dollar on Friday, helped by firmer central bank guidance but was headed for a weekly decline as a widening yield gap with the United States and tariff threats pressured the currency.

The yuan dipped slightly to 7.2988 per dollar in early afternoon trade, after hitting a 13-month low on Thursday.

Prior to market open, the People’s Bank of China (PBOC) set the yuan’s daily guidance rate at 7.1901, more than 1,100 pips stronger than Reuters estimate in a sign of official support.

“The PBOC has stepped up efforts to rein in depreciation pressure,” HSBC said in a report.

The yuan’s guidance fixing “has been capped slightly below 7.20 since 12 November, alongside increasing evidence of spot intervention,” the bank said.

RBC Capital Markets strategist Alvin Tan expects the PBOC will “continue to lean against USD strength at least through the new year.”

China’s yuan eases after remarks at key economic meeting fail to inspire

On Friday, China left its benchmark lending rates unchanged as expected at its monthly fixing, but long-dated Chinese yields continued their declines following a short-lived rebound triggered by central bank’s warning this week against a bond bubble.

China’s 10-year benchmark yield fell more than 2 basis points on Friday to 1.7125%, nearing a record low touched earlier this week. That pushed the US yield advantage to its widest in more than two decades.

“The RMB is facing more headwinds stemming from widened yield disadvantages against the USD and tariff risks post the US election,” HSBC said.

“But we think the PBOC will still control the pace and magnitude of RMB depreciation for the sake of guarding against capital flight, promoting RMB internationalisation, and deflecting ‘currency manipulation’ accusations.”

The Institute of International Finance also warned that “the strengthening dollar continues to pose challenges to most countries, especially net exporters.”