Alan Luk Ting-lung, treasurer at American Express Bank, said market participants may expect US officials to call for a stronger yuan during high-level economic talks between the United States and the mainland being held in Annapolis, Maryland.

'I think the mainland authority will only let the currency rise at a gradual pace, it may hurt exports if it rises too fast,' he said.

Mr Luk anticipated that the yuan would rise by about 8 to 9 per cent this year. The currency has risen by 5.6 per cent so far this year.

Although the US Congress has not passed legislation to prod the mainland to accelerate the yuan's rise, labour groups and some manufacturers hope it will become an election issue.

'Doing something on China's currency, I think is something that is still on the agenda for the Democratic leadership,' Bloomberg quoted a Senate aide as saying.

Law Ka-chung, the chief economist and strategist at Bank of Communications, said the mainland government would not bow to western pressure. However, he expected the yuan would continue to appreciate as the government wanted a stronger yuan to curb inflation.

The mainland's inflation rate moderated to 7.7 per cent last month, marking a substantial decline from 8.5 per cent in April.

'Inflation could rebound in the second half as rising wages, the indirect impact from the earthquake and soaring fuel prices may not be fully reflected in the current figure,' Mr Law said.

He expected the currency would continue rising but at a gradual pace, adding it would appreciate 9 per cent to 14 per cent for the whole year.

Yuan one-year non-deliverable forwards contracts yesterday indicated it could rise 6.1 per cent to 6.475 over the next 12 months.

Separately, Hong Kong interbank rates remained firm yesterday, with one-month and three-month interest rates standing at 2 per cent and 2.35 per cent respectively.

Citi said in a report that the three-month interbank rate could rise to 2.75 per cent by the end of the year.