SHANGHAI (Dow Jones)--The Chinese yuan rose to another modern-era high against the U.S. dollar Friday after the central bank set the dollar-yuan central parity rate at a record low.

Traders said the yuan’s modest but steady rise against the dollar--it appreciated 0.28% this week and 0.53% the week before--indicates Beijing may have wanted a stronger currency as well as increased two-way flexibility in the exchange rate when the central bank removed the yuan’s peg to the U.S. dollar on June 19.
On the over-the-counter market, the dollar was at CNY6.7711 around 0930 GMT, surpassing the previous modern era closing low of CNY6.7810, hit Thursday. It traded between CNY6.7696 and CNY6.7778.
The low end of the trading band represents the yuan’s strongest intraday level against the dollar since the 1980s, before the currency was allowed to be regularly traded as part of China’s market-oriented reforms.
The People’s Bank of China set the session’s dollar-yuan central parity rate at 6.7720, down from 6.7858 Thursday and a record low for the yuan’s modern era.
Traders said Friday’s fixing was below market expectations, even considering the dollar’s sharp drop against the euro overnight. The dollar-yuan fixing is the daily mid-point around which the spot rate is allowed to trade up or down by as much as 0.5%.
The dollar fell against the euro and yen overnight after disappointing economic data fueled concern the U.S. recovery is slowing, leading investors to sell the U.S. unit.
The euro rose to $1.2515 in late New York trading Thursday from $1.2238 Wednesday. The dollar fell to Y87.56 from Y88.43.
The euro was at $1.2503 around 0930 GMT, and the dollar was at Y87.92.
The yuan also fell against the euro as a result of the European currency’s renewed strength. The central bank set the euro-yuan central parity rate at 8.4741, up significantly from 8.2933 Thursday.
“We had thought the (dollar-yuan) fixing wouldn’t fall much today because the yuan had already appreciated a lot in recent days, even when the euro-dollar was relatively stable,” said a Guangzhou-based trader at a foreign bank.
“It seems the central bank is sending a signal that it’s not only increasing two-way yuan trading flexibility, but is allowing the yuan to appreciate,” he said.
Yuan demand intensified near the end of the trading session as bank dealers cut dollar positions ahead of a key U.S. employment report later Friday.
“The bid side is quite weak,” a Shanghai-based trader at a local bank said. “No one wants to hold dollars over the weekend because of the non-farm payroll report.”
Total U.S. nonfarm payrolls likely fell by 110,000 in June, according to the median forecast in a survey of economists.
Offshore, the one-year dollar-yuan NDF was at 6.6690/6.6740, unchanged from late Thursday. The one-month dollar-yuan NDF was at 6.7750/6.7780, still above the spot rate, implying the market anticipates moderate yuan depreciation in the near term.