Yuan Rises to Highest Since End of Peg


The yuan climbed to the highest since a dollar link was abolished in 2005 on speculation that China will quicken gains to damp inflation.

The central bank has allowed the yuan to gain 5.3 percent against the dollar this year, approaching the 7 percent advance in 2007. Premier Wen Jiabao pledged last week that the government will step up controls on price increases after inflation reached an 11-year high of 8.7 percent in February.

The currency advanced 0.07 percent to 6.9366 per dollar in Shanghai as of 5:30 p.m., from 6.9417 late last week, according to the China Foreign Exchange Trade System. It touched 6.9361, the highest since the peg was scrapped.

China won't loosen its monetary policy after an earthquake in Sichuan province killed more than 62,600 people and left more than 5 million homeless, the Securities Times said today, citing Fan Gang, a central bank adviser. The central bank has allowed faster yuan appreciation and raised the reserve ratio for banks four times this year to curb inflation.

The inflation rate of 2008 is estimated to reach about 7 percent, more than the government's annual target of 4.8 percent, Fan Jianping, an economist at State Information Center, wrote in the official China Securities Journal today.


TradingEconomics.com, Bloomberg
5/26/2008 8:13:24 AM