The yuan rose to its highest since 2005 yesterday, with analysts forecasting further strengthening against the US dollar as the mainland aims to stem inflation and cool runaway economic growth. The yuan closed at 7.6047 to the US dollar, the highest in almost two years. It rose 0.11 per cent from Friday's close of 7.6132. The currency has appreciated more than 6.2 per cent since the People's Bank of China revalued the yuan to 8.11 against the US dollar in July 2005. 'The currency will continue to rise and it would not be a surprise to see it break through 7.6 in days,' said Philip Lau Cheuk-hang, an executive vice-president and treasurer at Citic Ka Wah Bank. Mr Lau said interest rates on the mainland were not high enough to curb inflation so the government could allow the yuan to appreciate at a faster pace. The world's fastest-growing key economy may grow by 10.8 per cent this year, according to economists at the People's Bank of China, the China Securities Journal reported on Friday. Consumer prices might rise 3.2 per cent, the most since 2004, and more than the central bank's 3 per cent limit, the report said. Mr Lau said the further appreciation of the yuan could also help the government reduce its huge trade surplus, which had driven foreign exchange reserves to US$1.2 trillion. The authorities are under pressure from the United States and other trading partners to quicken the pace of yuan appreciation as they say a weaker Chinese currency gives mainland exporters an unfair advantage. Last month, US Secretary of the Treasury Henry Paulson described the yuan as undervalued and called on the mainland to speed up its progress towards a market-determined exchange rate. Mr Lau expects the yuan may rise a further 3 per cent, to about 7.37 by the end of the year, after gaining more than 2.5 per cent in the first half of this year. Economists at Citigroup Global Markets are more bullish, expecting the yuan would appreciate by 5 per cent for the rest of this year, reaching an annual gain of 7.5 per cent. Credit Suisse chief regional economist Dong Tao estimated a 5 per cent to 7 per cent gain in the currency this year. The Hong Kong Monetary Authority said in its quarterly report that it expected the yuan could appreciate to between 7.42 and 7.11 against the US dollar by the end of the year.