The China Foreign Exchange Trade System showed that the Chinese yuan closed at 6.1192 against the dollar yesterday reaching a record high since 1993, when China started its modern currency trading system. Despite the recent slowdown of the Chinese economy, the Chinese Yuan has increased by 1.8% so far this year. The main reason behind the strength is the rising interest rate, which aims to encourage more investors to bet on the Yuan.

The strengthening yuan means a possible further decline in Chinese exports, according to a State Information Center report. A government think tank said China needs more monetary actions to keep the currency exchange rate stable for China’s exporters, who have already experienced a decline in foreign trade in the first half of 2013. The stronger yuan has resulted in a spot rate deviation of 0.83% from the People’s Bank of China’s fixed rate, leading some to speculate whether the current 1% trade band is to be widened. However, experts warn that although more flexible trade band has been expected, it is not likely to happen in the short term.