BEIJING, March 16 -- The yuan yesterday made its biggest single-day gain since its revaluation, after Premier Wen Jiabao said China will increase the flexibility of its currency valuation system.

    The People's Bank of China posted a daily reference rate of 8.0388 against the US dollar at yesterday's opening session, up 0.11 percent from Tuesday's closing quote.

    The growth marks the yuan's biggest daily rise since China appreciated its national currency 2.1 percent on July 21, dropping its decade-old link to the US dollar and replacing it with a basket of currencies. The yuan has gained about 3 percent against the dollar so far.

    The reference quote, or daily opening rate, is based on weighted-average quotes from 10-plus commercial lenders, indicating market value.

    Under the current managed floating forex system, the central bank allows a 0.3 percent daily trading band.

    The yuan closed at 8.0377 against the greenback yesterday at the China Foreign Exchange Trade System, the operator of China's interbank forex trading system, marking a 0.12 percent gain from Tuesday's level.

    It was the first time the single-day move broke the 0.1 percent mark.

    "Premier Wen's reaffirmation of China's policy to move to a more flexible yuan was the main driver for the yuan's strengthening," said Zhu Heng, a dealer for the Industrial and Commercial Bank of China.

    Said Stephen Green, a senior economist at Standard Chartered Bank, "The Chinese yuan had its most exciting day yet - or at least from the perspective of its price against the US dollar."

    "This is evidence that the PBOC and State Administration of Foreign Exchange are feeling more comfortable in allowing more flexibility - and will allow the fluctuations to grow toward the 0.3 percent official range against the US dollar over the course of the next half-year," he said.

    Foreign-exchange analysts continue to expect the yuan to end the year at 7.8 to the dollar, he added.

    Wen told reporters on Tuesday that the government will add more flexibility to the exchange rate's trading band, without giving a schedule.

    "The yuan has the room and capacity to move upwards and downwards freely under the current mechanism," Wen said.

    He also ruled out a one-off administrative appreciation or depreciation.

    (Source: Shanghai Daily)