SHANGHAI: China’s yuan extended its winning streak on Tuesday, reaching a near four-month high against the dollar, as it gained from a much stronger midpoint fixing and more stable Sino-US ties.

Markets were surprised the People’s Bank of China (PBOC) continued to support the yuan via its daily midpoint fixing despite the onshore yuan having strengthened nearly 2.4% to the dollar over the past week, traders and analysts said.

“It is surprising to see they keep lowering the fixing at this rate. To me, it looks like they are doing preparatory work ahead of its policy rate cut,” said Kiyong Seong, lead Asia macro strategist at Société Générale CIB.

Prior to market opening, the central bank set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1406 per US dollar, the strongest since Aug. 7. The gap between the fix and Reuters’ estimate narrowed to 271 pips from more than 700 pips just a day earlier.