Yuan climbs to 2016 high

The currency climbed 0.13 per cent to 6.4993 a dollar in Shanghai

The onshore yuan advanced to the strongest level since December after China's central bank raised its daily reference rate by the most in four months.

The magnitude of the fixing increase surprised Australia & New Zealand Banking Group, with senior currency strategist Khoon Goh putting it down largely to a euro rally and dollar decline overnight. The European currency jumped the most since February 3 after central bank President Mario Draghi said he didn't see any need to cut interest rates further, while a gauge of dollar strength fell 0.54 per cent.

The yuan climbed 0.13 per cent to 6.4993 a dollar in Shanghai, according to China Foreign Exchange Trade System prices. It rose to 6.4866 earlier, the strongest level since December 29. The offshore rate in Hong Kong gained 0.13 per cent to 6.4963. The People's Bank of China raised its fixing, which restricts onshore moves to two per cent on either side, by 0.34 percent to 6.4905.

"The fixing and yuan moves reflect euro strength and dollar weakness overnight, as well as Chinese officials' anticipation for further strength in non-dollar major currencies," said Christy Tan, head of markets strategy at National Australia Bank Ltd. in Hong Kong. "The new yuan index continued its downward drift after falling below 99 in early February, and this is in line with the authorities' aim of keeping the currency stable but allow gradual weakness against the basket."