Recent currency movements put the yuan, for the first time, within the same trading range as the Hong Kong dollar, whose value is allowed to fluctuate inside a tiny band between HK$7.75 and HK$7.85 to the U.S. dollar. The development came ahead of a planned visit to Beijing in mid-December by U.S. cabinet officials led by Treasury Secretary Henry Paulson, during which China's exchange-rate policy is expected to be a major topic.

Despite the gains, strong growth in China's stockpile of hard currency-now more than $1 trillion-is considered by many critics as evidence that the yuan's gains have been too slow to have an impact on China's soaring trade surplus with the U.S. and other countries.

Critics say Beijing's interference in its exchange-rate mechanism keeps the yuan artificially undervalued, making China's exports less expensive than they should be.

The yuan also benefited from a fall globally in the U.S. dollar, traders say. Indeed, concerns about China's plans for its currency reserves helped fuel that decline internationally after Wu Xiaoling, a deputy governor of China's central bank, was quoted as saying there is growing "depreciating risk" for dollar-denominated assets held by central banks in East Asia as a result of weakness in the U.S. dollar. Markets are on constant alert for any sign China is losing its appetite to accumulate dollars as a reserve currency.

Separately, the People's Bank of China appeared to signal that it would allow more cash to enter the local yuan money market, a possible precursor to allowing the yuan to strengthen further. Usually, the central bank aims to remove money from the market as an alternative way to reduce the risk of inflation, other than letting the yuan strengthen. The cash flows into the market because the exporters who power China's huge trade surplus must buy local currency with the dollars they earn overseas.

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