SHANGHAI: The yuan firmed against the dollar on Friday, recouping lost ground for the week, though the Chinese currency was likely to still labour under the weight of expectations for faster rising US interest rates and concerns arising from the Ukraine conflict.

The spread between Chinese and US 10-year treasury yields has shrunk to a two-year low of roughly 45 basis points (bps), compared with 155 bps in late 2021.

Onshore yuan rose to as much as 6.3585 per dollar in morning trading, 112 pips stronger than Thursday’s official close, despite China’s central bank setting the midpoint rate at a one-week low of 6.3739.

A fall in China’s coronavirus cases reported on Friday could offer some relief to investors if the fall becomes a trend. China reported 1,366 confirmed coronavirus cases for March 24, down sharply from 2,054 a day earlier.

Otherwise there have been signs of heavy foreign outflows from Chinese markets since Russia invaded Ukraine, as investors reckoned Beijing’s friendship with Moscow could become a handicap the longer the conflict lasts.