HONG KONG: China’s yuan hovered near a one-week high against the dollar on Thursday, as the central bank set firmer guidance while hopes of a deal to end the Iran war weighed on the safe-haven U.S. currency.

The yuan strengthened to as far as 6.7929 against the dollar, the strongest since May 14.

It last traded 0.04% lower at 6.8002.

The offshore yuan stood at 6.8026 yuan per dollar, down about 0.01% in Asian trade.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.8349, its strongest since February 15, 2023, and 394 pips weaker than a Reuters estimate.

The spot yuan is allowed to trade a maximum of 2% on either side of the fixing each day.

Meanwhile, the greenback paused its rally on hopes that Washington is nearing a deal with Tehran to end the war. The dollar’s six-currency index was flat at 99.19.

On Wednesday, U.S. President Donald Trump said negotiations with Iran were in the final stages but warned of further attacks unless Iran agreed to a deal, adding that Washington could wait a few days to “get the right answers.”

“The softer USD, lower UST yields and pullback in oil offered some breathing room for Asian FX after the recent

pressure,“ Christopher Wong, FX Strategist at OCBC, wrote in a note.

Analysts at Bank of America said they maintain the year-end USD/CNY forecast of 6.70, underpinned by an expected resolution of the Iran conflict and China’s preference for FX stability during times of global stress.

“China can afford some modest appreciation to blunt imported inflation, support CNY internationalisation and placate FX valuation concerns” despite weak domestic growth, they said.