Chinese shares surged nearly two percent by midday on Monday after policymakers pledged at the weekend to make the yuan exchange rate more flexible.
The Shanghai Composite Index, which covers both A and B shares, was up 1.95 per cent, or 49.13 points, at 2,562.36 by the end of the morning session.
"Expectations of a yuan rise are positive for the markets in the medium term, and this will provide some support for the recently sluggish market," Xu Yinhui, an analyst from Guotai Junan Securities, told Dow Jones Newswires.
The People's Bank of China said Saturday it would "strengthen the flexibility" of the yuan exchange rate, which some analysts saw as a sign Beijing was ready to scrap the dollar peg and allow the currency to rise.
However, the bank came out Sunday to douse expectations, saying there would be no "large swings" in the currency and no one-off adjustment.
The central bank on Monday held the central parity rate -- the centre point of the currency's allowed trading band -- at 6.8275 to the dollar, unchanged from Friday.
The yuan strengthened against the dollar in early trading, however, falling to 6.8154 on the nation's main foreign exchange trading market, the lowest level since October 8, 2008.
But the currency was still within the allowed trading range, which was set at between 6.7934 and 6.8616 for Monday.
China -- under mounting pressure to strengthen the currency -- has effectively frozen the yuan at about 6.8 to the dollar since mid-2008 to boost exports during the world financial crisis.