Yuan Posts Third Weekly Gain

The yuan gained for a third week after China's central bank governor said preventing ``elevated inflation'' is a priority as the government raised fuel prices by at least 17 percent from today.

It's hard to say whether inflation will continue to ease in 2008, Governor Zhou Xiaochuan told reporters in Washington yesterday after meetings this week with U.S. Treasury Secretary Henry Paulson. The currency traded near the strongest since a link to the dollar was abandoned in 2005 as forwards contracts flagged a 6.6 percent gain for the yuan over the next 12 months.

The currency was little changed at 6.8801 a dollar in Shanghai as of 5:30 p.m., compared with 6.8776 yesterday, according to the China Foreign Exchange Trade System. The yuan climbed 0.3 percent this week and reached 6.8748 yesterday, the highest since a fixed foreign-exchange rate was scrapped in 2005.

The central bank set the reference rate for daily yuan trading lower today for the first time this week. The yuan is allowed to trade 0.5 percent either side of that rate.

The government raised gasoline and diesel prices and increased power tariffs, the nation's top planning agency said on its Web site yesterday. Central bank Governor Zhou said he would ``closely monitor'' the country's inflation.

China has allowed a faster appreciation in the yuan this year to help curb consumer prices, which rose 7.7 percent last month from a year ago, slowing from 8.7 percent in February, the fastest in almost 12 years. The yuan, which is the top-performer among Asia's 10 most-traded currencies over the past three months, has gained 6.2 percent versus the dollar so far this year.

Yuan Posts Third Weekly Gain

TradingEconomics.com, Bloomberg
6/20/2008 7:22:41 AM