The moves came ahead of a high-level meeting in Washington next week during which China and the United States are expected to discuss major thorns in their trading relationship, of which the currency rate is the biggest.

The interest rate hikes, meanwhile, were widely anticipated as China seeks to cool an economy that grew at a blistering 11.1 percent rate in the first quarter of the year.

The currency trading range will be broadened to 0.5 percent either side of a daily reference rate against the US dollar from the previous 0.3 percent, with effect from Monday.

The currency closed at 7.668 to the dollar on Friday, the latest in a series of recent record highs amid upward pressure on the yuan.

"This is directly related to the meeting next week," said Chen Xindong, an economist with BNP Paribas in Beijing.

US Treasury secretary Henry Paulson will meet a Chinese delegation led by Vice Premier Wu Yi, one of China's most senior leaders, for the twice-yearly Strategic Economic Dialogue in the US capital next week.

The move also comes as the finance ministers of the world's richest countries gather in Germany for the annual Group of Eight meeting.

The central bank also said beginning Saturday it would raise the benchmark for one-year lending rates by 0.18 percentage point to 6.57 percent and hike the deposit rate by 0.27 percentage point to 3.06 percent.

The move was intended to ensure "reasonable growth" in investments, and keep prices stable, the People's Bank of China said in a statement on its website.