China's yuan gave back some of its earlier gains against the US dollar yesterday but finished the domestic session at the strongest since October 2015, supported by continued sell-offs in the greenback.

The onshore yuan opened at 6.3666 per dollar and surged to a high of 6.3148 at one point in afternoon trade before changing hands at 6.3350, the strongest close since October 30, 2015.

The Chinese yuan has gained 2.7 percent against the sliding dollar so far this year, following a rise of about 6.8 percent in 2017.

The US dollar skidded to a three-year low against its peers yesterday after comments by US Treasury secretary Steven Mnuchin that he welcomed a weaker currency, while the euro was firm ahead of the European Central Bank's policy decision.

The single currency extended its overnight rally to US$1.2425, up 0.15 percent and went as high as US$1.2428, its strongest since December 2014.

The dollar slumped after Mnuchin told the World Economic Forum in Davos on Wednesday that "obviously a weaker dollar is good for us as it relates to trade and opportunities." His comments were seen by markets as a departure from traditional US currency policy.

The greenback had already been on the defensive on trade protectionism worries fanned by US President Donald Trump's decision to impose steep import tariffs on washing machines and solar panels earlier in the week.

It was 0.1 percent lower at 109.105 yen, after sinking 1 percent the previous day to a four-month trough of 108.965.

The dollar index against a basket of six major currencies stretched overnight losses to 89.064, the lowest level since December 2014.

The immediate focus was on the ECB's policy setting meeting later in the global day as markets look for any signs that the central bank is worried about the rapidly appreciating euro.

The euro zone economy may be roaring ahead though the expectation is that a rapidly strengthening euro may see ECB President Mario Draghi pour cold water on the view the bank is speeding towards an interest rate hike.

However, HSBC Holdings (0005) chairman Mark Tucker said China's yuan cannot challenge the dollar's dominance as the world's top reserve currency.

On the sidelines of the World Economic Forum in Davos, Tucker said the yuan will be more significant, but the main barriers to its development are its lack of convertibility and capital controls.