Bitcoin slides as much as 20 percent as Chinese yuan rises

LONDON (Reuters) - A dramatic rally in digital currency bitcoin came to a spectacular end on Thursday with a plunge of up to 20 percent as China's yuan rose sharply - further evidence of an intriguing inverse relationship between the pair.

Bitcoin had gained more than 40 percent in two weeks to hit a three-year high of $1,139.89 on Wednesday, just shy of its all-time record of $1,163 on the Europe-based Bitstamp exchange <BTC=BTSP>. But it dived as low as $885.41 on Thursday as the yuan jumped by over 1 percent in offshore trading and headed for its strongest two-day performance on record. <CNH=D3> [CNY/]

Chinese exchanges have reported high volumes of trading of the web-based "cryptocurrency" over the past year, during which time the yuan has shed almost 7 percent, its worst annual performance since 1994, while bitcoin has surged 125 percent, outperforming all other currencies for a second year in a row.