SHANGHAI, June 25 (Reuters) – The yuan climbed on Friday to its highest since its July 2005 revaluation after the central bank set the daily reference rate at a post-revaluation high in an apparent goodwill gesture ahead of the G20 summit.

But trade was sluggish with market players cautious over how much the yuan could appreciate in the near term, despite a gain so far of 0.5 percent in the first week after China's weekend announcement of a depegging from the dollar, marking the biggest weekly gain since December 2008.

Weekly volatility in the spot yuan rate versus the dollar hit its highest since mid-2008, when China repegged the yuan to the dollar to help ease the impact of the global financial crisis on its economy.

Spot yuan's range for the week ran to 416 pips and averaged more than 200 pips per day, compared with moves of only a few pips per day during the two-year dollar peg.

Many dealers expect two-way volatility to remain the norm after China's weekend currency policy reform, although the yuan's rise will not likely be enough to satisfy US lawmakers and other critics who want the yuan to rise as much as 40 percent.

China is not expected to accept such a demand.