The yuan advanced the most in almost a month, as policy makers seek to prevent a record trade surplus from fuelling growth in money supply. Premier Wen Jiabao pledged last week to take ``forceful'' steps to curb prices. The yuan has climbed 4 percent this year, more than half of last year's 7 percent gain.
The currency rose 0.3 percent to 7.0105 per dollar as of 5:30 p.m. in Shanghai, the highest since the peg to the dollar was abolished in July 2005, according to the China Foreign Exchange Trade System.
The People's Bank of China set the reference rate for the currency today at 7.0130 per dollar, compared with 7.0252 yesterday. The yuan is allowed to trade up to 0.5 percent on either side of the rate.
China's central bank sold 81 billion yuan ($11.5 billion) of three-year notes today at a yield of 4.56 percent and 63 billion yuan of three-month sterilization bills at 3.4 percent in open-market operations. Both yields were the same as previous auctions of the securities on Jan. 10.
China Development Bank, which lends on behalf of the government to public works, yesterday sold 30 billion yuan of five-year bonds at a yield of 4.63 percent, 49 basis points above the one-year deposit rate. The yield was 6 basis points lower than the median estimate of a Bloomberg News survey.
The yield on the 10-year treasury bond fell 2 basis points to 4.08 percent, according to China Bond Fixings compiled by Bloomberg. The price of the 4.41 percent security due December 2017 rose 0.12 per 100 yuan face amount to 102.55. A basis point is 0.01 percentage point.
China's government bonds have handed investors a return of 1.6 percent this year, after delivering a loss of 2 percent in 2007, according to indexes of 10 Asian local-currency debt markets compiled by HSBC Holdings Plc.