Shanghai Daily reported that China's yuan climbed toward a 19 year high on November 26th 2012, hitting its daily trading cap for the 18th time this month, on expectation global investors will boost holdings of local assets as the world's second largest economy recovers from a seven-quarter slowdown.
The People's Bank of China set the daily reference rate stronger by 0.03 percent to 6.28840 per dollar yesterday and the currency closed at 6.2255 per dollar on the spot trading market, nearly breaching a 19-year record of 6.2252 on November 14.
According to the China Foreign Exchange Trade System, the yuan has tested the 1% upper limit of its trading band for the 18th time in the past 20 trading days.
Mr Ding Zhijie a professor at the University of International Business and Economics in Beijing said that "The yuan has resumed appreciation in the fourth quarter because China's economy is recovering and exports have rebounded. Banks are less willing to buy US dollars and this drives the yuan to the upper ceiling of its trading band."
China's manufacturing activities may have expanded in November for the first time after 13 months of contraction, the HSBC's Flash China Purchasing Managers' Index showed last Thursday, the earliest indicator of the nation's monthly manufacturing activities.
China Foreign Exchange Trade System data showed that yuan has strengthened 1.9% since September 3 on the spot market, more than offsetting the 0.86% depreciation during the first eight months.
The central parity rate set by the central bank was up 0.84% in the past three months, a sign taken by economists that the bank is more tolerant about the recent appreciation trend.
A Shanghai based trader said there was not much liquidity on the market and the exchange rate would be stable unless the central bank significant raises the central parity rate or intervenes in other ways.