SHANGHAI, June 21 (Reuters) - Spot yuan CNY=CFXS climbed on Monday to its highest versus the dollar since its revaluation five years ago, as the central bank stepped aside and let the market push the currency higher after it signalled it would end a 23-month dollar peg.
Spot yuan strengthened to 6.8026 to the dollar in early afternoon trade, compared with Friday's close of 6.8262, even after the People's Bank of China set Monday's mid-point CNY=SAEC unchanged at 6.8275 before trading started.
But dealers said the yuan's sharp rise could not be sustained and the PBOC still had many resources at its disposal to keep yuan appreciation to its own pace, including the daily mid-point.
The yuan will likely pull back later in the session, because banks that shorted dollars will have to buy them back before the end of the day due to Chinese foreign exchange rules.
The PBOC, the Chinese central bank, announced the government would ditch the yuan's 23-month peg to the dollar and said it would allow the currency to trade more flexibly, paving the way for appreciation. [ID:nN20208975] (Reporting by Lu Jianxin and Koh Gui Qing; Editing by Edmund Klamann)