The PBOC has engineered several rounds of yuan appreciation against the US dollar since the start of this year as China uses the exchange rate to manage inflation, adjust its economic model and raise the yuan's global status.

Traders said the central bank was likely to let the yuan rise further at least in the near term albeit at a controlled pace -- often defined as the "two steps forward, one step back" approach -- to deter speculation on one-way appreciation.

"It is certain that the yuan will continue to appreciate, but the pace is controlled by the PBOC," said a dealer at a Chinese commercial bank in Shanghai.

"Speculators who bet too much, too fast on yuan's appreciation have been burnt may time before."

Spot yuan closed at 6.3810, stronger than Friday's close of 6.3868. It has now appreciated 6.97 percent since it was depegged from the dollar in June 2010 and 3.27 percent so far this year.

In intraday trading, it hit an all-time peak of 6.3801, toppling its previous record high of 8.3820 hit on Aug. 16.

Before trading began, the PBOC fixed the mid-point at 6.3883, stronger than Friday's 6.3950 and topping the fixing's historical high of 6.3896 set last Wednesday.

The fixing is the central bank's base rate from which the yuan can move 0.5 percent in either direction and expresses the government's intention of how the yuan should move.

Offshore, the one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.2820 in late trade, down from Friday's close of 6.2840, with their implied yuan rise in a year's time rising to 1.69 percent from 1.65 percent.

Copyright Reuters, 2011