THE yuan strengthened the most in three weeks after the Chinese central bank raised the reference rate above 6.16 for the first time in 19 years.

The currency closed at 6.1250 to the US dollar, up 0.09 percent and the most since May 27, according to the China Foreign Exchange Trade System. It is near the yuan's all-time high record of 6.1210 on May 27.

The People's Bank of China yesterday set the central parity rate at 6.1598, the strongest since the country unified the market and official exchange rates at the end of 1993. The yuan can trade up to 1 percent on either side of the fixing.

The yuan has become more volatile due to a slower inflow of foreign capital, China's weak economic data, and Chinese banks having to buy foreign exchange to meet end-of-quarter regulatory requirement.

''Market conditions do not support significant appreciation of the yuan but policy makers are signaling their intention to keep the currency strong,'' said Liu Dongliang, a China Merchants Bank analyst.

A Shanghai-based trader said the yuan may fluctuate between 6.12 and 6.14 to the dollar for some time as demand and sales of foreign exchange were more balanced after the State Administration of Foreign Exchange in May enhanced scrutiny of banks' foreign exchange position and companies' trade settlement.

Data released yesterday showed Chinese banks' net purchases of foreign exchange from their clients halved in May from April.