China's central bank fixed its currency exchange rate at a three-month high against the US dollar on Friday as the greenback sank.
The People's Bank of China (PBoC) set the yuan at 6.4628 to $1.0, up 0.51 percent from the fix on Thursday, according to the China Foreign Exchange Trade System.
It marked the strongest level for the central rate since December, as well as its biggest positive move since November.
Authorities only allow the yuan to rise or fall two percent on either side of the daily fix, to prevent volatility and maintain control over the currency.
In trading on Friday, the onshore yuan was quoted at 6.4727 to $1.0 at 4:30 pm (0830 GMT), up 0.31 percent from the previous day's close.
The US dollar has sunk since the Federal Reserve surprised markets by reducing its projections for interest rate increases this year, citing the slower global economy and market turmoil.
"The market is now expecting the Fed to raise borrowing costs fewer times this year, which eases capital outflow pressures from emerging markets and supports Asian currencies, including the yuan," Kenix Lai, a foreign-exchange analyst at Bank of East Asia in Hong Kong, told Bloomberg News.
"But the PBoC won’t likely allow significant appreciation of the yuan because a currency that’s too strong will hurt China's exports and economic fundamentals."
China's State Administration of Foreign Exchange on Wednesday said: "The pressure from cross-border capital outflows has slowed down significantly" and forecast they would remain stable.
The Chinese government has spent huge sums to support the currency and stem capital flight since rattling investors with a surprise devaluation in August, when it guided the normally stable unit down nearly five percent in a week.