×

China's yuan closes at record high, hits strong-side trading limit

* Yuan surges to new all time record high

* Closes at strong-side limit of daily trading band

* C.bank sets stronger mid-point after four days of weakening

* Dealers cite strong corporate demand

(Updates to close)

SHANGHAI, Oct 25 (Reuters) - China's yuan closed at a record high on Thursday after hitting the strong-side limit of the central bank's daily trading band as a result of heavy demand as firms unwound long dollar positions built up in the first half of the year.

The spot exchange rate closed at 6.2417 versus the dollar, an all-time high and the strongest level permitted by the central bank's trading band. The yuan had closed at 6.2480 on Wednesday.

Since the yuan hit its weakest point of the year at 6.3967 in late July, the currency has now strengthened over 2.4 percent and 0.8 percent since the start of 2012.

It was the first time the yuan touched its strong-side limit since the central bank widened the trading band to one percent up or down in April this year.

The central bank has used the daily fixing to restrain the yuan from appreciating faster on the spot market.

The People's Bank of China on Thursday morning set its midpoint at 6.3047. That was moderately stronger than Wednesday's fix of 6.3081, but the additional space was not enough to prevent the yuan from hitting its limit.

The central bank set a string of sharply stronger fixings between Oct. 10-18, prompting some analysts to conclude that the central bank was guiding the yuan higher and possibly even directly purchasing yuan in the market.

But some traders said the market's behaviour on Thursday suggested that the stronger fixings had been mainly aimed at giving the yuan more space to move in line with supply and demand conditions in the market.

Traders say corporate demand for yuan is strong, as firms unravel long dollar positions built up in the first half of the year, when the dollar rose on safe-haven demand.

``There are no bids (for dollar's) in the market,'' said a dealer at a European bank.

The dollar index weakened during Asian trading hours, further supporting the yuan's gains. The yuan usually strengthens as the greenback loses ground in global markets.

(Editing by Simon Cameron-Moore)