China's yuan hit a post-revaluation high against the dollar on Friday and closed near its peak on expectations of a short-term spike in the currency, as US pressure mounts for yuan appreciation ahead of Sino-US talks next week.
After the end of trade, the central bank said it would widen the yuan's trading band against the dollar to 0.5 percent on either side of its daily mid-point, up from 0.3 percent, although it said the move was aimed at developing the market and increasing flexibility, not boosting the currency.
The move was quickly followed by a hike in China's interest rates and banks' reserve requirements, to cool the over-heating economy and address economic imbalances that have drawn criticism from US politicians.
Analysts considered the expansion of the yuan's band a largely symbolic gesture ahead of next week's meeting, rather than a major policy shift, as Beijing has steadfastly resisted US political pressure on its foreign exchange policy.
The market never aggressively tested the upper edge of the yuan's previous trading band, so dealers did not think the widened band would necessarily lead to faster appreciation in the long term, although near-term volatility was possible.
"The market is optimistic about the possibility of yuan rises in the short term, and (yuan) buying throughout the afternoon session pushed the yuan to a post-revaluation high," said a dealer at major Chinese commercial bank.
The Chinese currency hit an intraday high of 7.6679 to the dollar late in the session, its highest level since Beijing revalued the currency and depegged it from the dollar in July 2005. It closed at 7.6686, up from 7.6707 at Thursday's close.