China's yuan hit a record-high against the US dollar on Monday, backed by a strong mid-point set by the nation's central bank. The yuan traded at an all-time high of 6.3-2-8-7 against the greenback, and it's expected to close the year near 6.3-0 versus the dollar. The mid-point is fixed by the People's Bank of China before trading to express the government's intention for the yuan's daily movement and the yuan is permitted to fluctuate within half a percent of either side of the mid-point in a day. The central bank has been setting higher mid-points whenever the Chinese currency traded at the lower end of its trading limit as China has been using its currency to fight high inflation. The yuan is expected to record an over-four percent appreciation for 2011, and it looks like the upward trend will continue next year. China's big trade surpluses and pressure from the United States are some factors that will keep the Chinese currency afloat. And amid the ongoing global economic uncertainties centering on advanced economies, the yuan is becoming an attractive currency. According to China's central bank, China will allow Japan to use the yuan to conduct direct investment in the mainland, and support the development of a direct trading market between the two countries' respective currencies. The agreements, which come after a meeting between Japanese Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing on Sunday, is expected to strengthen the status of the yuan as an international currency. The latest deal is expected to sharply reduce the use of the greenback in trade between the two countries.

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