China's tightly-controlled yuan traded at a record high against the U.S. dollar on Tuesday and unprecedented demand has made it stand out as one of the world's most attractive currencies, analysts told CNBC.
Following strong trade data published over the weekend, the People's Bank of China (PBOC) has been aggressively fixing the yuan's daily mid-point at its highest levels since the 2005 currency revaluation.
On Tuesday, the yuan was fixed at 6.1114 to the dollar and rose to a fresh record high of 6.0703. The central bank controls yuan trading by limiting its movement to 1 percent on either side of a daily-fixed mid-point.
"To my mind this [the yuan] is out on its own as the best currency on the planet," Stuart Oakley, managing director of Asian currency trading at Nomura (Tokyo Stock Exchange: 4307.T-JP), told CNBC Asia's Squawk Box on Tuesday.
(Read more: Yuan now second most used currency in trade finance )
Aside from more positive data out of the economy and signs that reform plans are gaining traction, Oakley told CNBC that another more important driver underlies yuan strength.
"The real issue for the yuan doesn't so much lie in the data actually. It lies in the unprecedented structural demand from sovereigns, corporates and from retail investors around the world, because relative to any other currency, it's out on its own," he added
China saw its largest trade surplus in more than four years in November, thanks to an acceleration of exports and slowing imports. The positive data has boosted long-running hopes that the Chinese central bank might feel more comfortable relaxing its grip on the yuan, a move that many analysts say could pave the way for strong gains.
Nomura's Oakley said the PBOC's latest move suggests that action is imminent: "I think the band will be widened imminently it could be this week or in a month," he said.
However, even if there is no immediate action Oakley said traders would still benefit from being short U.S. dollars and long the yuan.
"You're still making money whether they widen the band or not as it's all about the flows," he added.
The yuan has been one of Asia's strongest performing currencies this year, up around 2.53 percent against the dollar year to date. In contrast, the Japanese yen (Exchange:JPY00H=) is down 20 percent against the dollar, while the Indian rupee (Exchange:INR00H=) is down 11.17 percent.
(Read more: Singapore and Hong Kong exchanges team up on yuan )
And last week the Society for Worldwide Interbank Financial Telecommunication (SWIFT) reported that the yuan had overtaken the euro to become the second most used currency in international trade finance worldwide, after the dollar.