HONG KONG: The yuan was flat on Friday but was set to show its first weekly gain in three weeks after news that U.S. and Chinese trade negotiators will meet Washington in October to find a way to de-escalate their countries' tariff war.

On Friday, spot yuan traded at 7.1475 per dollar at midday, almost unchanged from the previous late session close and leaving it with a 0.1% advance for the week if it holds that level till the close.

The currency had its worst month in 25 years in August as China and the United States ramped up the trade war, and the People's Bank of China has used the daily fixing to brake the yuan's decline .

The PBOC set the yuan's daily midpoint – the spot rate can trade 2% either side – at 7.0855 per dollar, stronger than the Reuters' estimate of 7.1003.

“This reflects the central bank's attitude at this stage to keep the yuan relatively stable," said a currency trader in Shanghai. “Moving forward, (the exchange rate) will depend on supply and demand and how the trade talks go."

With the Chinese National Day on October 1, Beijing was unlikely to escalate the trade war further and should keep the yuan stable, said another trader at a Chinese bank in Shanghai.

The offshore yuan was trading 0.05 percent firmer than the onshore spot at 7.1436 per dollar.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 91.01, unchanged from Thursday.

The dollar was bolstered on Friday by encouraging U.S. economic data, which could also be supportive for the yuan as it reduced some of gloom over the global economy, but analysts said it could also push back expectations for U.S. interest rate cuts and give U.S. negotiators confidence to drive a harder bargain in the trade talks.

“A relatively stronger U.S. economy is viewed as counterproductive for trade talks because it encourages U.S.

President Trump to play hardball and push back Fed cut expectations," DBS bank analysts said in a note.