Yuan firms as dollar steadies, eyes on US payrolls

SHANGHAI, April 3 (Reuters) - China's yuan firmed against the dollar on Friday as the greenback steadied and the focus turned to the release of U.S. payrolls data later in the day.

The dollar had jumped on safe-haven demand a day earlier when U.S. President Donald Trump indicated the Iran conflict would drag on.

The spot yuan CNY=CFXS opened at 6.8930 per dollar on Friday and was last trading 37 pips firmer than the previous late-session close.

Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 6.8929 per dollar, 45 pips weaker than a Reuters estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

The dollar stabilised on Friday after rising on Thursday as Trump's threat to bomb Iran "back to the Stone Age" heightened risks in a war now in its fifth week, dimming hopes for a swift resolution to a conflict squeezing oil supplies and stoking inflation.

The outbreak of war in the Middle East has supported safe-haven demand for the dollar, and the yuan has moved into a consolidation phase after strengthening sharply in the first quarter of 2026 on the back of twin surpluses in trade and foreign-exchange settlement, analysts at Zijin Tianfeng Futures said in a note.

Growth in China's services activity slowed in March from February's 33-month high, as softer demand and a decline in overseas orders weighed on momentum, a private-sector survey showed on Friday. This came after the official manufacturing PMI returned to expansion in March, suggesting limited impact from the Iran conflict.

The yuan is likely to remain resilient in the second quarter, supported by China's high energy self-sufficiency rate, sizable strategic reserves and growing renewables demand, analysts at MUFG said.

Meanwhile, liquidity remains ample in onshore money markets. The weighted average rate of China's seven-day repo CN7DRP=CFXS traded in the interbank market fell to 1.3119%, the lowest since August 8, 2022.

Investors are watching closely for the U.S. non-farm payrolls data, which could affect the dollar-yuan pair.

The offshore yuan traded at 6.8846 yuan per dollar CNH=, up about 0.1% in Asian trade.

The dollar index =USD, which measures the greenback against a basket of six currencies, was 0.058% higher at 100.04.

LEVELS AT 0234 GMT