Chinese negotiators could sketch outlines for a deal to end their countries' trade war.

Sources familiar with the negotiations told Reuters that the two sides had begun to outline commitments in principle on the stickiest issues, marking the most significant progress yet toward ending a seven-month trade war.

The yuan's rally began on Wednesday morning following a Bloomberg report, which cited unidentified people involved in and briefed on the ongoing trade discussions, saying United

States was pressing China to pledge not to devalue the yuan as part a deal to end their trade war.

Ken Cheung, senior Asian FX strategist at Miuzho Bank in

Hong Kong said in a note that the People's Bank of China may have refrained from intervening to curb the yuan's recovery due to sensitivities over the currency while the trade talks were being held.

Prior to market open, the PBOC set the midpoint rate at 6.722 per dollar, the strongest level since Feb.1, and 338 pips or 0.5 percent firmer than the previous fix of 6.7558.

In the spot market, the onshore yuan opened at 6.7200 per dollar and jumped to a high of 6.6920 per dollar at one point, the strongest level since Jan. 31.

As of 0624 GMT, the onshore spot yuan was changing hands at 6.7040, 131 pips stronger than the previous late session close and 0.27 percent firmer than the midpoint.

Some domestic traders expect the onshore yuan to continue trade around 6.7 per dollar as an economic slowdown in China does not support a much stronger currency.

"The outcome of the latest round of trade talks is still not clear enough, the spot yuan is likely to swing in ranges at current levels," said a trader at a foreign bank in Shanghai.

The yuan had weakened by more than 5 percent against the dollar during 2018.

Separately, China's Premier Li Keqiang told a cabinet meeting that China has not and will not change its prudent monetary policy and will not resort to "flood-like" stimulus.

His remarks came after China made the most new loans on record in January - totalling 3.23 trillion yuan, after a slew of strong stimulus last year.

The offshore yuan surged to a high of 6.6880 in morning trade, the strongest level since July 17, 2018. As of 0624 GMT, it was trading at 6.7037 per dollar.