Shanghai: The yuan firmed for a fourth straight day on Friday, posting its biggest weekly gain since April as China`s state-run banks were suspected of supporting the currency before Group of 20 finance officials meet this weekend in Chengdu.


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There has been heavy intervention by those banks after the yuan on Monday breached a key psychological level of 6.7 per dollar for the first time in more than 5-1/2 years. For the week, the yuan rose 0.3 percent.


China typically holds the yuan steady before and during major diplomatic events. The G20 meeting of finance minister and central bank governors from major economies is likely to focus on currencies and monetary policy settings globally.


In September, a G20 summit of world leaders will also be in China.


Early this year, there were worries in markets that China might engineer a sharp depreciation of the yuan to lift its exports and slowing economy. On Friday, Premier Li Keqiang reiterated that China will maintain a basically stable exchange rate.


Markets have been less jumpy about the yuan`s latest descent, as fears of a hard landing for the Chinese economy ease and as the People`s Bank of China`s new method for setting its daily yuan price fixings becomes somewhat more predictable.


Still, many market watchers expect the central bank will allow the yuan to weaken further in coming months if the economy continues to struggle, though some believe it may allow a more gradual decline after a 2.7 percent fall so far this year.


Prior to Friday`s market opening, the PBOC set the midpoint rate at 6.6669 per dollar, 0.3 percent firmer than the previous fix of 6.6872. Traders said Friday`s guidance rate was within market expectations.


The spot market opened at 6.6715 per dollar, and at the close of the official daytime trade at 4:30 pm (0830 GMT), the PBOC announced the yuan was at 6.6704, or 0.1 percent stronger than Thursday`s close. There is an evening session that lasts until 11.30 pm Shanghai time.


`MUCH HAPPIER` CENTRAL BANK


Traders said state banks was defending the yuan at 6.67 on behalf of the central bank during the day.


"I believe the central bank is much happier right now with the yuan back to 6.66," said a trader at a Chinese commercial bank in Shanghai.


Bearish bets on China`s yuan have likely eased from five-month highs after the central bank was suspected of intervening to support the currency, a Reuters poll showed on Thursday.


Many market watchers expect the PBOC to let the yuan weaken further in coming months if the economy continues to struggle, though some believe it may allow a more gradual decline.


"It seems to me China`s central bank has put a brake on CNY depreciation, at least temporarily," Zhou Hao, senior emerging markets economist at Commerzbank in Singapore, said in a note.


HSBC economists wrote last week China`s path to greater exchange rate flexibility "is not a straightforward one, but involves various `ease-then-squeeze` episodes". They forecast a year-end dollar-yuan exchange rate of 6.90.


The offshore yuan was trading 0.08 percent softer than the onshore spot at 6.675 per dollar around 4:30 pm, suggesting eased depreciation pressure on the yuan.


The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 96.07, almost flat from the previous day`s 96.04.