The Chinese yuan has become more stronger and touched a record high, due to the downgrade of US debt rating by S&P, which fuelled speculation that China will rein in dollar purchases to limit appreciation.

The Peoples Bank of China raised its reference rate for the currency by the most since November after S&P cut Americas top credit rating by one level to AA+ on Aug. 5. The U.S. should avoid letting its currency weaken or taking fresh monetary steps that may worsen the dollars depreciation, Xinhua News Agency said yesterday in a commentary. China is the biggest foreign owner of Treasuries, holding $1.16 trillion of the securities as of May, U.S. Treasury Department data show.

China may accept faster yuan appreciation as the downside of holding U.S. dollar assets is greater than that of slower export growth, said Dariusz Kowalczyk, a Hong Kong-based senior strategist at Credit Agricole SA.

The yuan rose 0.21 percent to 6.4268 per dollar as of 12:39 p.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency touched 6.4250 earlier, the strongest level since the country unified official and market exchange rates at the end of 1993.

The Peoples Bank of China set its daily fixing 0.23 percent higher at a record 6.4305 per dollar. The currency is allowed to trade up to 0.5 percent on either side of the official rate.

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