SHANGHAI (July 31): China's yuan rose to its highest level against the dollar in more than three years on Friday, even after the central bank set a weaker-than-expected midpoint to signal discomfort with recent gains.

The People's Bank of China (PBOC) set the midpoint at 6.7894 per dollar, marginally softer than the previous setting, but 581 pips weaker than a Reuters' estimate of 6.7313, marking the biggest deviation on the weaker side since Feb 27.

The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

The central bank has been setting weaker-than-expected yuan midpoints since November 2025, which analysts and traders interpret as an effort to prevent excessive yuan gains.

Wee Khoon Chong, Apac macro strategist at BNY, said the central bank sent "its strongest signal yet against rapid yuan gains".

The large deviation came "despite a near unchanged fixing, indicates growing discomfort with the pace of appreciation," Chong said.

Despite the weaker midpoint fixing bias, the yuan has strengthened about 0.6% against the dollar this month, bringing its year-to-date gain to 3.6%.

While trailing the Australian dollar's 5.3% advance over the same period, it remains among the stronger-performing Asian and emerging market currencies.

In the spot market, the onshore yuan strengthened to a high of 6.7484 per dollar at one point, the strongest level since Feb 3, 2023, before changing hands at 6.7486 as of 0224 GMT.

Its offshore counterpart last fetched 6.7465 yuan per dollar as of 0224 GMT.

The yuan's strength reflected broad dollar weakness in global markets, traders said, after Japan intervened to support the yen by selling dollars in New York on Thursday, a market source told Reuters.

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