Critics have previously said the yuan is undervalued

The yuan reached 7.82 to the dollar on Monday, after hitting 7.83 on Friday.

Analysts say the central bank could let the currency continue strengthening ahead of the arrival of US Treasury Secretary Hank Paulson this month.

The rising yuan will be welcomed by many in the US, who have accused China of keeping its currency artificially weak in order to boost exports.

'Goodwill gesture'

In the past the US critics have said a weak Chinese currency unfairly harms domestic firms which cannot compete with Chinese goods sold to the US.

"China is likely to make a goodwill gesture around the time of Mr Paulson's visit," said one European dealer.

In addition to Mr Paulson, the US delegation to China is tipped to include the chairman of the Federal Reserve, Ben Bernanke, and other government officials.

Discussions will examine trade and currency among other topics.

China, which has previously said it would reform its foreign exchange rate regime, revalued the yuan by 2.1% in July 2005.

The yuan has been rising against the dollar, which has reached 20-month lows against both the euro and pound.

The dollar's fall has been prompted by fears that the world's biggest economy is cooling down.

One dealer from a large Chinese commercial bank said the dollar's weakening on global markets was greater than many had predicted.

In separate news on Monday, Chinese state media said the country needed a new organisation to manage its burgeoning foreign exchange reserves, the largest in the world.