Yuan Gains to Post-Peg High


The yuan rose to the strongest since the end of a dollar link in 2005 on speculation China will accelerate its pace of currency appreciation to help stem inflation at an 11-year high.

The Chinese currency approached 7 against the dollar after central bank Vice Governor Yi Gang reiterated that China will allow the yuan to play a bigger role in adjusting the nation's international balance of payments. U.S. Treasury Secretary Henry Paulson visited Beijing last week and said China's currency needs to reflect economic fundamentals.

The yuan advanced 0.2 percent to 7.0015 versus the dollar at 5:30 p.m. in Shanghai, the biggest gain in more than a week, according to the China Foreign Exchange Trade System. It touched 7.0013, the strongest since a peg to the dollar was scrapped in 2005.

The People's Bank of China set the reference rate for trading at 7.0020 today. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the rate.

The currency's gains have gathered pace since Paulson's visit last week. It rose 4.2 percent in the first quarter.

The People's Bank of China increased borrowing costs six times last year, and has kept its benchmark deposit and lending rates unchanged so far in 2008.


TradingEconomics.com, Bloomberg
4/7/2008 6:58:53 AM