The Chinese yuan rallied against the US dollar on Friday, extending its strength this week with its largest gain in eight sessions. The central bank set the midpoint rate at 6.8794 against the dollar. That was 164 basis points firmer than the previous fix. The midpoint gained 374 basis points for the week and the rate gap between the onshore and offshore yuan declined.

Analysts say expectations of tighter regulations bolstered the yuan's offshore rate. They also said that downward pressure remains on the Chinese currency. The yuan's rate has been volatile recently as the currency weakened 1.85 percent against the dollar last month before gaining strength.