China's foreign exchange reserves have officially passed the $1 trillion (£512.9 billion) mark, the country's central bank has announced. 

In trading early Tuesday, the euro rose to $1.2695 from $1.2938 late on Monday, with analysts predicting it will top $1.30 by the end of the week and at ¥155.90.

Over the final quarter of 2006, China's foreign exchange reserves, the world's largest by a wide margin, grew $78.4 billion, the biggest three-month increase of the year.

The central bank has been purchasing the US dollar to hold down the cost of the yuan to ensure competitive export growth.

The bank has not released information on the exact make-up of the reserves but they are thought to be at least 70 per cent dollar-denominated.

Commerce ministry data released yesterday showed that total overseas investment during 2006 was up five per cent on the year before.

Excluding financial sector investors, direct overseas investment in China reached $63.02 billion during 2006.