The central parity rate of the Chinese currency, the yuan, strengthened for the tenth consecutive working day to a nearly 16-month high against the U.S. dollar Friday.
The central parity rate of the yuan strengthened 237 basis points to 6.5032 against the U.S. dollar, its strongest level since May 2016, according to the China Foreign Exchange Trade System.
The adjustment came after a rise of 42 basis points Thursday and 59 basis points Wednesday. The rate fell below 6.6 last Friday, the first time since June last year.
In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
The yuan has appreciated by 6 percent in cumulative terms against the dollar since the beginning of the year.
The dollar index against a basket of six major currencies was down 0.5 percent at 91.21 Friday as long-dated Treasury yields fell to 10-month lows.
Lingering concerns over tensions related to the Democratic People's Republic of Korea may limit the dollar's upside versus other major currencies, according to CITIC Securities.
Guan Tao, former head of the international payments department at the State Administration of Foreign Exchange, attributed the yuan's rise to China's solid economic fundamentals, stable cross-border capital flows and balanced supply-demand in the forex market.
China's economy expanded 6.9 percent in the first half, well above the target of around 6.5 percent for the year.
Its manufacturing activity expanded for the 13th consecutive month in August, providing fresh evidence of a firming economy.
China's forex reserves rose for the 7th month in a row in August to 3.092 trillion U.S. dollars, increasing 10.8 billion dollars from a month earlier.
"So far, the aim to keep the yuan exchange rate basically stable at a reasonable and balanced level has reached better-than-expected success," Guan said.
While recent weakness of the U.S. dollar and market sentiment have strengthened the yuan, UBS economist Wang Tao does not see the yuan embarking on a multi-year appreciation path.
"We expect the dollar and the yuan to be range bound for the remainder of the year, trading at 6.5-6.6 at the end of the year," Wang said in a research note.