The Chinese yuan strengthened to a record high against the U.S. dollar on Thursday to reach 6.5997 per dollar.

The central parity rate of the Chinese currency, also known as the renminbi (RMB), was set 131 basis points lower than Wednesday's 6.6128, according to the China Foreign Exchange Trading System.

China's central bank announced on June 2010 it would further reform the yuan exchange rate formation mechanism to improve its flexibility.

On China's foreign exchange spot market, the yuan can rise or fall 0.5 percent from the central parity rate each trading day.

The central parity rate of the RMB against the U.S. dollar is based on a weighted average of enquired prices from all market makers before the opening of the market each business day.