The yuan Wednesday touched the strongest level against the US dollar in 19 years in intraday trading but economists expect the rate to remain stable in the near term. [File Photo]

The yuan Wednesday touched the strongest level against the US dollar in 19 years in intraday trading but economists expect the rate to remain stable in the near term.

The yuan closed at 6.2262 per dollar in Shanghai, weakening from Tuesday's 6.2241, according to the China Foreign Exchange Trade System. In intraday trading, the Chinese currency touched 6.2216, the strongest level since the government unified the official and market exchange rates at the end of 1993.

"Some domestic banks have increased their purchases of US dollar as the rate was low," said a Shanghai-based trader who declined to be identified. "But overall market transactions were inactive, and the situation is likely to last till after the Chinese New Year (in February)."

The People's Bank of China set the reference rate at 6.2814, 0.02 percent weaker than an eight-month high on Tuesday. The yuan is allowed to trade as much as 1 percent on either side of the central parity rate.

The spot and central parity rates have been flat since the market opened after the New Year holiday on Friday. Some economists said the market has fundamentally reached an equilibrium level, leading to Tan Yaling, head of the China Forex Investment Research Institute, to say: "There is no ground for much appreciation of the yuan."

But economists from DBS took a contrarian view by predicting the yuan to strength 2.5 percent this year to 6.07 yuan per US dollar.

Related

• Yuan to strengthen mildly in 2013:

Go to Forum >>0 Comment(s)