China’s central bank has set the yuan’s daily reference rate against the US dollar at its strongest level in more than three years, as global banks turn increasingly bullish on the Chinese currency.

The People’s Bank of China set the yuan’s midpoint rate, also known as the daily fixing rate, at 6.8349 to the US dollar on Thursday – the strongest showing since February 2023.

The move followed a 0.22 per cent appreciation in the offshore yuan on Wednesday, after bouts of volatility over the past week. As of early afternoon on Thursday, the offshore yuan was trading at 6.803 per US dollar.

The yuan has been gradually appreciating in value since early last year – despite occasional fluctuations – buoyed by China’s resilient exports and a weakening US dollar. Several global banks have recently projected further gains for the Chinese currency.

Bank of America said in a note on Wednesday that it predicted the yuan to strengthen to 6.70 per US dollar by the end of this year, which it said was premised on “a resolution of the Iran conflict and China’s preference for FX [foreign exchange] stability in times of global stress”.

“The issue, however, is that China’s domestic economy remains weak and overly reliant on exports,” the bank added.