The mainland currency has risen 3.3 per cent this year and 5.7 per cent since the revaluation in July last year.

At one point in the early session yesterday, the yuan was even quoted at 7.7980 to the dollar. But an official with the China Foreign Exchange Trade System, the mainland's foreign exchange market, said the price quotation was the result of a lone, errant quote and was therefore invalid.

'We discovered that a bank had mistyped that figure and have since cancelled the quote,' Reuters quoted the official as saying.

Still, foreign exchange dealers say the yuan's continuing climb will level it with the Hong Kong dollar as early as next week, right after the New Year holiday. The currencies last achieved parity in 1992.

Andrew Fung Hau-chung, deputy general manager at Hang Seng Bank, said it was no surprise to see the yuan continue to appreciate due to the mainland's buoyant economy, flood of cash looking for mainland assets and pressure from the Sino-US trade imbalance.

'The yuan forward contract has already shown the yuan reach parity with the Hong Kong dollar,' Mr Fung said.

The mainland central bank yesterday set the yuan's mid-price at 7.8087 against the US dollar, up from Thursday's mid-price of 7.8149.

Financial Secretary Henry Tang Ying-yen and Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong have said the yuan's appreciation had only a psychological impact on the market, and the city's monetary policy would not require any changes.

Market watchers expect the yuan to strengthen by another 3 to 5 per cent next year.

A stronger yuan could be beneficial for Hong Kong in that tourists from the mainland, who account for more than half the visitors to the city, will have more money to spend. But it could fuel inflation as much of the city's food and other goods come from the mainland.

Nicolas Kwan Ka-ming, region head of research at Standard Chartered Bank, believed the impact on Hong Kong's inflation would be small as the yuan was expected to move gradually.