The advance took the yuan's gain this quarter to 1.8 percent after retail sales increased the most in at least eight years, adding to speculation the central bank will keep raising interest rates to cool the economy. China must let the yuan rise faster given ``mounting inflation, growing asset bubbles and possible overheating,'' Paulson said today.
Paulson, who is on his fifth visit to China since becoming Treasury Secretary, is pressing for a more rapid yuan appreciation to help offset global imbalances in trade, which U.S. and European officials blame on an undervalued currency. Export earnings have flooded the banking system with cash, making it more difficult for China to slow economic growth.
The currency rose 0.05 percent to 7.3770 per dollar as of the 5:30 p.m. close in Shanghai from 7.3805 late yesterday, according to the China Foreign Exchange Trade System. It touched 7.3670, the highest since the link to the U.S. currency was scrapped in July 2005 and completed a fourth day of gains.
People's Bank of China Governor Zhou Xiaochuan said this week that China will use exchange-rate policy to stem economic growth as inflation reached the highest in almost 11 years and the trade surplus rose to the third-biggest monthly total. The economy is expanding at the fastest pace among the world's 20 largest economies.
The yuan climbed 0.85 percent versus the dollar in November, the biggest monthly gain since the peg, and has advanced 6 percent this year, lagging behind the Thai baht, the Philippine peso, India's rupee, Malaysia's ringgit and the Singapore dollar. China's currency has declined about 5 percent against the euro in 2007.