(Yicai Global) Jan. 29 -- The Chinese yuan is set to rally further against the U.S. dollar, climbing to 6.18 by the close of this year, according to a research report published today by investment bank China International Capital Corp.

The yuan advanced 169 basis points to 6.3267 today, the currency's strongest level since Nov. 2, 2015 following prolonged weakening of the U.S. dollar. CICC had earlier predicted an exchange rate of 6.28 by the end of 2018.

Yuan strength sets the foundation for a more positive outlook for financial opening-up, as well as further progress in internationalizing the Chinese currency, a top policy goal. CICC believes that some 'temporary' capital control measures will be lifted or relaxed, especially those on forex transactions by China residents.

CICC cautions about the challenge of managing cross-border capital flows as companies may seek gain in forex arbitrage. Their foreign currency hoarding and exposure to overseas-denominated debt have soared since 2016, suggesting an upswing in those seeking advantage from price differentials, the report said.

Though the yuan has gained against the dollar since last year, the effective exchange rate has remained stable as the yuan depreciated against the euro, the UK pound and the currencies of most neighboring Asia-Pacific countries. As a result, the impact of fluctuations in the yuan-dollar pairing had little impact on China's imports and exports, the report noted.

Over the past year or so, a notable increase in nominal Chinese incomes and the marked devaluation of currencies in tourist destinations have greatly boosted the purchasing power of Chinese visitors. Tourism in Hong Kong, Macao, Japan and the U.S. will benefit from the yuan's appreciation against the greenback, the report said.