China's hit a record high on Monday after the central bank set a firmer midpoint in response to hopes that Cyprus will avoid a banking crisis, but traders remained cautious about betting on further appreciation.
Spot yuan touched 6.2095 per dollar in early trade, its highest level ever, and was trading at 6.2103 by mid-morning, a gain of 0.03 percent over Friday's close.
The spot rate has closely tracked movements in the People's Bank of China's (PBOC) daily midpoint in recent weeks, and that pattern continued on Monday.
The PBOC fixed the yuan at 6.2692 on Monday morning, its strongest fixing since Jan. 15 and 0.03 percent stronger than Friday's midpoint.
The strong fix came after the dollar fell against the euro overnight on Friday and in early Asian trade on Monday, reflecting confidence that Cyprus will reach a deal to avoid a financial meltdown.
On Monday morning, euro zone finance ministers and the International Monetary Fund endorsed a plan to close down one of Cyprus' biggest banks and restructure another one as part of a deal to allow Cyprus to access international rescue funds.
Traders said the yuan's rise on Monday mainly reflects the central bank's response to movements in the global dollar but that the PBOC will still aim to keep the yuan relatively stable in the weeks ahead.
Data due out this week will indicate whether the strong corporate demand for yuan evident in January continued in February. If so, the central bank may face more pressure to allow further appreciation.
But a trader at a major state-owned bank in Beijing said on Monday that corporate demand now appears largely balanced.