Yuan Advances on Speculation China to Curb Prices


China's yuan rose, reversing a loss, on speculation the central bank will speed up the currency's appreciation to help reduce inflation from an 11-year high.

The Chinese currency gained for a second day even as some Asian currencies that the central bank uses to manage its exchange rate weakened against the dollar on concern that the U.S. economy will enter a recession, damping demand for Asian exports. China's economic growth probably cooled last quarter due to slackening U.S. demand for local products and measures to temper inflation, according to a Bloomberg News survey.

The yuan fell to 7.2365 per dollar as of the 5:30 p.m. close in Shanghai, compared with 7.2418 at the end of last week, according to data compiled by Bloomberg. The yuan is a denomination of China's currency, the renminbi.

The central bank set the reference rate for daily trading in the yuan weaker for a third day. The PBOC calculates the daily rate by taking a weighted average of quotes from commercial banks designated to act as market makers in the currency. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the so-called central parity rate.

The yuan has strengthened 14 percent since its peg to the dollar was scrapped in 2005 as China pledged to extend efforts to slow its export-led economic expansion and curb inflation.


TradingEconomics.com, Bloomberg
1/21/2008 8:54:53 AM