China's yuan strengthened against the dollar on Thursday as dealers increasingly expected the central bank to allow the yuan to appreciate slightly ahead of a visit to the country by US President George W. Bush.
The yuan, which was revalued by 2.1 percent on July 21 to 8.11 per dollar, closed at 8.0847 versus 8.0857 on Wednesday. It was the third straight day that the Chinese currency had edged higher.
"The yuan has shown a steady though slow uptrend," said a Shanghai-based dealer at a foreign bank. "That has sparked increasing expectations that China may allow the yuan to rise slightly in coming days as a goodwill gesture to Bush."
Bush, who is due to visit China from November 19 as part of a four-nation trip to Asia, urged Beijing on Tuesday to do more to allow the yuan to strengthen and said the trade imbalance between the two countries was "bothersome."
He is expected to discuss his hopes for more currency flexibility with Chinese President Hu Jintao.
Dealers said the yuan is now poised to test 8.0840, hit on October 28 as its highest level after the July policy change.
On Thursday the yuan firmed slightly against the euro to close at 9.5036 compared with 9.5091 on Wednesday. It ended stronger to close at 6.8602 per 100 yen from 6.8852, the central bank said on its Web site.