China's currency hit a record high against the US dollar for the second straight day on Friday, amid US political pressure and growing confidence in the domestic economy, analysts said.
The currency touched an intra-day high of 6.2380 to the dollar at the open, marking the highest level since 1994 when the country launched its modern foreign exchange market.
Analysts said China may be allowing the yuan to appreciate to defuse criticism that the unit is grossly undervalued, ahead of the US presidential election on November 6 and an upcoming US government report on exchange rates.
The yuan closed at 6.2489 to $1.0 on Friday, weakening from Thursday's close of 6.2417, despite earlier touching the record high, according to figures from the China Foreign Exchange Trade System.
“There are expectations that Beijing may use this as a gesture to the United States ahead of the presidential election and the upcoming exchange rate report,” Jiang Shu, an analyst at China's Industrial Bank, told AFP.
The US Treasury Department issues a semi-annual report on exchange rate policies that addresses China, among other countries.
The US Treasury said earlier this month that it would put off publishing the report to Congress so it could “assess progress following the G-20 finance ministers and central bank governors meeting next month.”
China's exchange rate has been a long-running source of friction with the United States and presidential hopeful Mitt Romney recently vowed to brand the country a currency manipulator.
When the US Treasury report was last released in May this year it stopped short of accusing China of manipulating its exchange rate, but warned its “significantly undervalued” currency was a brake on global growth.
Analysts said expectations China's economy, which grew an annual 7.4 percent in the third quarter, might have hit bottom were also helping the currency to strengthen.
Capital inflows sparked by the latest round of US quantitative easing stimulus have also contributed to the yuan's recent strength, they said.
“China's economy has brought about hopes of a recovery. People are becoming more confident and expecting appreciation of the currency,” Lu Ting, China economist at Bank of America Merrill Lynch, told AFP. - Sapa-AFP