SHANGHAI: China's yuan softened on Friday after the central bank set a weaker daily fixing, with the US dollar headed for its second straight week of gains as traders awaited a US jobs report for clues to the timing of Federal Reserve rate hikes.

But the Chinese currency hit new multi-year highs against a trade-weighted currency basket after the Bank of England's decision to keep its rates steady hammered the pound.

Reuters calculations showed China's trade-weighted CFETS yuan basket index rising to 100.83 on Friday morning, its highest since January 2016.

"After expectations for a Bank of England rate hike fell through, the market may reevaluate the thinking of overseas central banks, and take a look at officials' comments and US non-farm payrolls," said a trader at a foreign bank. The Bank of England kept interest rates on hold on Thursday, surprising investors who had been convinced that it would raise borrowing costs after the COVID-19 pandemic.

Before the market open on Friday, the People's Bank of China set the yuan's daily midpoint at 6.398 per dollar prior to market open, slightly weaker than the previous fix of 6.3943.