The Chinese yuan rose to a new high against the dollar in foreign exchange trading on Monday, reaching 7.8240 from 7.8331 on Friday, as the US currency continued its lows.

The pound was valued at $1.9770 in early trading on Tuesday from $1.9789 on Monday and was selling at 67.44p on the euro, from 67.34p.

The yuan has gained 3.5 per cent since its value was unpegged from the dollar in July 2005, with its parity set by the Bank of China on a weighted average of prices.

The bank limits movement to 0.3 per cent a day but it has steadily gained in recent weeks following China's announcement that it intends to diversify its $1 trillion reserves.

US negotiators are expected to push for a further loosening of exchange controls when they meet Chinese officials for bilateral talks on December 14th and 15th.

The dollar's recent decline has also added emphasis to Chinese internal warnings on over-reliance on dollar reserves, but it remains unclear if the currency will be sold at a loss.