The exchange rate of the renminbi (RMB) against the US dollar hit a new high on Wednesday.

The central parity of the RMB against the US dollar is 7.9598 yuan to one US dollar, following on from the new record set on Tuesday when it strengthened to 7.9669 yuan to one US dollar.

China has seen a continuous appreciation in its RMB since the central bank raised the one-year benchmark interest rate on August 19.

The rise in interest rates, which is expected to result in further appreciation of the RMB, may be followed by the widening of the floating band between the RMB and the US dollar, said market observers.

China set a floating band of 0.3 percent when launching its reform of the RMB exchange rate system last July, which means that the trading price between the dollar and the yuan on the inter-bank foreign exchange market will float within a 0.3 percent band around the official central parity.

The daily fluctuation of the RMB against the US dollar is currently reaching both the upper and bottom limits of the 0.3 percent.

Experts say that the widening of the daily floating band may temper appreciation of the RMB. In anticipation of the RMB gaining in value, China's foreign exchange reserves rose by US$122.2 billion in six months, which meant China had to increase the money supply by nearly 1 trillion yuan. This was blamed for the sharp rise in domestic loans.

Ba Shusong, an expert with the Development Research Center of the State Council, said that if the floating band is widened, the possibility for RMB depreciation is increased. This will increase the risk of speculation and investment will be more restrained, he said.

It is widely believed the widening of the band may be the next measure the central government takes to cool down its economy, which grew 10.9 percent in the first half of the year.

According to the report on China's monetary policies in the second quarter issued by the People's Bank of China (PBOC), China's central bank, the appreciation of the RMB is not the only way to solve the imbalance of international payments.

It should rely on the expansion of domestic demand, the reduction of savings, the adjustment of preliminary policies for foreign investment, the increase of imports, further opening up of the market and more fluctuation of exchange, said the report.

However, the central bank said in the report that the exchange rate will play a major role in advancing China's economic structural reform and economic policies in the future.