China's currency yuan rose to a 17-year high of 6.4167 against the US dollar yesterday, following China's July record trade surplus and a statement by the US Federal Reserve that it would maintain low interest rates until 2013 at least.

According to China's central bank, the yuan is allowed to trade up to 0.5 percent on either side of the official rate, and it touched 6.4120 yesterday during over-the-counter trading, which was the dollar's lowest level since China's exchange rate reform in 1994.

Though the possibility of another round of quantitative easing, or printing money, was not mentioned in the Fed's statement, analysts believe the US will stick to a relatively loose monetary policy to grapple with its swelling debt.

That means more speculative money will food into emerging countries such as China, thus increasing difficulties for those countries to curb inflation.

During a recent conference of China's central bank, the governor Zhou Xiaochuan stressed the implementation of a prudent monetary policy in the second half of this year, making price control a top priority on the cabinet agenda.

"China should definitely increase currency flexibility to ensure an independent monetary policy," said Li Miaoxian, an analyst with BOCOM International. "Serious inflation in China won't allow the government to adopt as easy a monetary stance as the US."

China's currency is around 5 percent stronger against the dollar than at the same time last year, but is weaker against other currencies such as the euro and the pound.

Li said the yuan had weakened by a weighted average of 1.5 percent against a basket of currencies since the beginning of 2011, and the depreciation had not affected China's exports significantly.

"A record surplus in trading allowed further appreciation of the yuan against the US dollar," a Beijing-based trader said. "But the jump in the exchange rate yesterday was larger than expected."

The DBS Bank said yesterday that the yuan would maintain stable appreciation and reach 6.30 against the US dollar by the end of 2011.