Yuan rises to new high, market sentiment improves

China’s yuan strengthened to last trade at a record of 8.0601 to the dollar on Friday, its biggest gain in a single trading session since its July revaluation, as traders bet on further appreciation.

The yuan gained nearly 0.1 per cent in the Friday session after last trading at 8.0673 to the dollar the previous day.

The currency has now appreciated a further 0.62 per cent since July 21 when it was revalued by 2.1 per cent to 8.11 per dollar. The yuan, also known as renminbi, strengthened at the beginning of the week after the central bank reported its forex reserves had reached a record $819 billion by the end of 2005, a factor noted by analysts that may help the yuan rise further as Beijing tries to manage its reserves for a better return.

But the currency, which is said to be linked to a basket of major international currencies including Japan’s yen, weakened on Tuesday and Wednesday after the dollar gained globally on positive news including stronger monthly US economic data.