Yuan Advances a Seventh Week


The yuan gained for a seventh week on speculation the government will allow more gains in the currency to combat inflation. Bonds fell.

European Central Bank President Jean Claude Trichet said yesterday that further gains in China's currency is in the country's interest and would help fight inflation. Consumer prices rose 7.1 percent in June, the smallest gain in five months, a report from the statistics bureau said yesterday.

The yuan strengthened 0.25 percent this week to 6.8169 per dollar as of 5:30 p.m. in Shanghai, from 6.8340 a week ago and 6.8213 yesterday, according to the China Foreign Exchange Trade System.

Curbing rising prices remains the top priority this year, Premier Wen Jiabao reiterated this month, after the government raised gasoline and diesel prices at least 17 percent from June 20 to help curb energy consumption.

Gross domestic product expanded 10.1 percent in the second quarter from a year earlier, the slowest pace since 2005, a government report showed yesterday. China's policy makers have refrained from raising interest rates this year following six increases in 2007.

The National Development and Reform Commission, China's top economic planning agency, said today it tightened scrutiny of foreign direct investment to prevent fake ventures that are being used to channel speculative capital. The yuan's 7.2 percent gain this year has attracted capital inflows, swelling foreign-exchange reserves to $1.81 trillion at the end of June.

The inflation rate in June eased from February's 12-year high of 8.7 percent on smaller gains in food prices. It still remains above the central bank's 4.8 percent annual target.


TradingEconomics.com, Bloomberg
7/18/2008 10:36:05 AM