China's official exchange rate broke through the psychologically important 8 yuan per dollar level today to reach its highest level since a revaluation in July.
Analysts said the US government's decision to not formally accuse China of manipulating its currency in a semi-annual report last Wednesday may have freed Beijing to let the yuan rise further.
Currency traders had been expecting the yuan, which had been hovering above eight to the dollar for weeks, to break through sometime soon.
Authorities announced the yuan's official rate at 7.9982 yuan per dollar today, according to the official Xinhua News Agency. The government announces the official exchange rate each trading day by calculating the weighted average of prices given by 13 market makers excluding highest and lowest offers.
The yuan has slowly but steadily gained ground against the dollar since it was revalued by 2.1 per cent on July 21, to 8.11 yuan. Since then, it has appreciated 1.38 per cent against the dollar.
China's currency trades in a narrow range, limited to moving 0.3 per cent above or below each day's parity rate.
Critics of China's foreign exchange policies accuse Beijing of controlling the yuan to keep its value artificially low. They contend that the yuan is undervalued by as much as 40 per cent, giving Chinese exporters an unfair price advantage overseas and contributing to the country's growing trade surpluses.
Chinese officials have pledged to eventually allow the yuan to trade freely in the market but favour a gradual approach, arguing that the country's fledgling financial system is not ready to face severe currency fluctuations.
AP