China's central bank allows the yuan to trade within 1 percent on either side of a midpoint that it sets each day.
The yuan has traded in a tight range for two months. Analysts say the fact that the central bank has allowed the yuan to break higher, especially after data at the weekend showed an unexpected fall in September exports, is interesting.
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"There has been a great deal of discussion about the U.S. standoff, which not only gives the Federal Reserve reason to continue QE [quantitative easing] longer, which is dollar-negative, but whatever deal gets done will have to be revisited early next year," saidWestpac Bank's Senior Currency Strategist Sean Callow.
"The U.S. dollar is coming out of this as damaged goods and the PBOC [People's Bank of China] is allowing some movement in the yuan," he added.
Macquarie's Idris said that although he was sticking to his year-end target for the yuan to firm to 6.08 to the dollar, if the current trend persists the yuan could get closer to 6.05 in the months ahead.
He added that another reason China may be allowing the yuan to creep higher is to help contain inflation. Data on Monday showed China's annual consumer inflation rate rose to a seven-month high in September at 3.1 percent.
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Chris Weston, chief market strategist at IG, a trading firm, said the yuan was increasingly being viewed as a safe-haven amid uncertainty in market and the turmoil in emerging markets this year on expectations for an unwinding of the Fed's asset-purchase program.
Data released earlier this week showed China's foreign exchange reserves, the biggest in the world, rose to $3.66 trillion at the end of September from $3.5 trillion at the end of June.
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"I think the yuan would be much higher if it wasn't for handling by the central bank," said Weston.
"Look at the latest FX reserves data: It's clear that while other emerging markets have seen outflows China has seen inflows. China is being seen as safe-haven in the current climate," he added.
— CNBC.Com's Dhara Ranasinghe; Follow her on Twitter