SAN FRANCISCO (MarketWatch) -- The Chinese government backed up its recent words with action Thursday, allowing the yuan currency to appreciate against the U.S. dollar in its tightly controlled foreign-exchange market at the fastest pace since Beijing ended its U.S. dollar "peg" in 2005.

The yuan closed Chinese over-the-counter trading at a new high of 7.3175 against the dollar, up 0.37% from Wednesday's close of 7.3444 -- its biggest daily rise ever. Shortly before the close, the yuan hit an intraday high of 7.3131.

"It's a huge move," said Win Thin, senior currency strategist at Brown Brothers Harriman. "I don't think it's in response to outside pressure, but rather to help China's domestic situation and fight inflation."