Yuan Rises Above 7.1 to Dollar


The yuan rose beyond 7.1 to the dollar for the first time since a fixed exchange rate ended in 2005 as the U.S. currency slumped and China's central bank sought to slow consumer price increases.

A stronger yuan may help Premier Wen Jiabao's efforts to curb inflation from an 11-year high and prevent economic overheating as it lowers the cost of imports and bolsters export prices. Central bank Vice Governor Yi Gang said on March 7 the nation will further increase exchange-rate flexibility.

The yuan rose 0.15 percent to 7.0900 at 5:30 p.m. in Shanghai, the biggest gain so far this month, compared with a close of 7.1010 yesterday, according to China Foreign Exchange Trade System. It touched as high as 7.0895 today. The yuan had traded within a range of 0.02 yuan this month prior to today.

The National People's Congress, China's parliament, has been meeting in Beijing to discuss how to cool the economy during a two-week meeting that ends March 18. Consumer prices climbed 8.7 percent in February from a year earlier, the statistics bureau said this week. The economy expanded 11.4 percent in 2007 from a year earlier, the fastest pace in 12 years.

European and U.S. officials have urged China to allow faster appreciation in the yuan to reduce global imbalances in trade that are threatening manufacturing jobs. They say the Asian nation keeps the currency undervalued to boost exports.

China abandoned the yuan's decade-old link with the dollar in July 2005, and has since managed its rate against a basket of currencies. The yuan has strengthened 16.5 percent against the dollar under the new exchange-rate system.


TradingEconomics.com, Bloomberg
3/13/2008 9:19:58 PM