Yuan Gains for Third Day


The yuan rose for a third day on speculation China is seeking to temper inflation through currency gains and as the dollar declined in Asia.

China's currency gained after Xinhua news agency reported curbing inflation is a priority for the government for the rest of the year, citing National Development and Reform Commission Vice Chairman Zhu Zhixin. Seven of Asia's 10 most-active currencies outside Japan strengthened against the dollar as the currency dropped versus the euro.

The yuan rose 0.15 percent to 6.8275 per dollar at the 5:30 p.m. close in Shanghai from 6.8380 yesterday, according to the China Foreign Exchange Trade System.

The central bank set a stronger reference rate for today's trading of 6.8326. The yuan is allowed to trade by as much as 0.5 percent against the dollar either side of the reference rate.

The central bank manages the exchange rate against a basket of currencies, including the yen and the euro, after scrapping a peg to the dollar in 2005.

The yuan has been little changed in recent weeks on speculation China will pursue a more moderate pace of appreciation to safeguard against a post-Olympics slowdown in the economy. The People's Bank of China said Aug. 15 it will ``fine-tune'' policies to strike a balance between maintaining growth and curbing inflation.

Average vegetable prices were 7.9 percent lower than a year earlier last week and grain prices were little changed, the Ministry of Commerce said Aug. 26 on its Web site. Food costs account for about a third of China's consumer price index.

China's annual inflation was 6.3 percent in July, the slowest pace in 10 months. The government is due to report August inflation on Sept. 11.


TradingEconomics.com, Bloomberg
8/28/2008 6:30:00 AM