Yuan strengthens to new high against US dollar

The yuan's value against the US dollar rose to its highest level Monday since China's foreign exchange rate reform began in 2005, with a rapid pace of appreciation seen recently amid stronger recovery in the country's economy and slow US growth.

The yuan's central parity rate against the US dollar was set at 6.1352 on Monday, breaking the previous record of 6.1372 recorded Friday, data from the China Foreign Exchange Trading System showed Monday. The yuan has advanced by 2.4 percent against the dollar so far this year.

Concerns over the expected US pullback from its massive quantitative easing program and worries about a possible default by the US government impacted investor sentiment toward the dollar, while confidence in the Chinese economy has been on the rise, resulting in the recent appreciation of the yuan, Li Wei, China economist at Standard Chartered Bank in Shanghai, told the Global Times on Monday.

China's economic growth quickened to 7.8 percent compared to a year earlier in the third quarter, up from 7.5 percent during the second quarter, the National Bureau of Statistics announced Friday, the latest sign of an improvement in the economy.

Appreciation of the yuan will continue this year and next, Li forecast, partly due to the country's continuing trade surplus.

Throughout 2014, the trade surplus as a percentage of China's GDP is expected to rise slightly to 3.7 percent from 3.5 percent in 2013, as the global economy will warm up next year leading to a brighter outlook for China's exports, said Li.

But the pace of the yuan's appreciation against the dollar "will fall rapidly," Lu Ting, chief China economist with Bank of America Merrill Lynch, said in a research note sent to the Global Times on Friday.

Lu emphasized in the note that "a further rise of the yuan against the dollar would most likely impair China's competitiveness."