(AP) China's currency strengthened Wednesday to its highest level against the dollar after the central bank began allowing banks a greater role in setting the yuan's value.

The yuan was trading at 8.0681 to the dollar midday, up from 8.0702 yuan on Dec. 30, the last day of trading before the New Year's holidays.

Since its July 21 revaluation to 8.11 yuan to the dollar, the Chinese currency has gained about 0.5 percent against the dollar.

The People's Bank of China, the country's central bank, on Wednesday began a new policy of calculating the yuan's value against the dollar using a weighted average of the prices given by major banks. The highest and lowest offers are excluded from the calculation, the central bank said in a statement issued Tuesday.

Giving banks a role in setting the new daily benchmark, called the central parity rate, is seen as a sign the central bank is willing to allow market forces a greater role in daily trading.

The newly calculated yuan benchmark central parity rates versus the dollar, euro, yen, and Hong Kong dollar are published each trading day at 8:15 p.m. EST. The rate posted Wednesday morning for the dollar was 8.0702 yuan, dealers said.

The system allows spot market participants to make bilateral currency trades on credit in addition to the automatic price-matching system currently in place, the central bank said Tuesday.

Throughout the morning, the yuan traded between 8.0681 and 8.0709 to the dollar. That's less than 0.1 percent, but a relatively broad range compared to its usual fluctuation. But according to rules announced at the July revaluation, China allows the yuan to trade only in a band of 0.3 percent above and below its opening level against the dollar and 3 percent versus other currencies.