SHANGHAI - China's yuan firmed against the retreating U.S. dollar on Friday but most traders were on the sidelines hoping Beijing would announce more stimulus measures this weekend to get the shaky economy on more solid footing.

The Ministry of Finance will detail plans on fiscal stimulus at a much-anticipated news conference on Saturday morning. The magnitude of the stimulus could affect sentiment on China assets including the yuan.

"Given widespread expectations of a fiscal package announcement in the 2-3 trillion yuan range, it is going to be difficult for Finance Minister Lan to surprise positively in a significant way in my view," said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

Reuters reported last month that China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of fresh fiscal stimulus.

Citi's traders and analysts said the offshore yuan may trade in a tight range ahead of Saturday's press conference but suggested it could strengthen ahead given their positive view of China's market after policymakers pivoted to more forceful growth measures.

The traders said they would only buy the dollar against the yuan if the pair dips below 7.00.

The spot yuan opened at 7.0720 per dollar and was last trading 72 pips firmer than the previous late session close at 7.0696 as of 0256 GMT.

Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0731 per dollar.

The U.S. dollar fell from two-month highs hit overnight versus its major peers after signs of weakness in the labour market boosted the case for quicker Federal Reserve rate cuts.

The yuan is down 0.7% against the dollar this month, but is 0.4% firmer this year as the Federal Reserve kicked off its rate cut cycle.

The offshore yuan traded at 7.079 yuan per dollar, up about 0.06% in Asian trade.

The dollar's six-currency index was 0.019% lower at 102.87.