Yuan Posts Record Monthly Gain as Snow Storms Fuel Inflation


The yuan posted a record monthly gain against the dollar on speculation China allowed the currency to appreciate faster to curb inflation.

The currency rose to the highest since the link to the dollar was abandoned as the worst snowstorms in five decades led to a surge in food prices, aggravating inflation that is already above the central bank's target. The government is allowing gains to cut the cost of imported grain, soybeans and palm oil.

The yuan gained 0.14 percent to 7.1818 per dollar as of the 5:30 p.m. close in Shanghai, from 7.1916 yesterday, according to China Foreign Exchange Trade System. It reached a high of 7.1815 and has gained 1.7 percent this month.

Chinese authorities are using the currency's strength to limit a surge in consumer prices, which rose to 6.5 percent in December, topping the central bank's 3 percent annual target.

Blizzards have crimped production and disrupted distribution of vegetables, seafood and fuel. Vegetable prices rose 12.6 percent in the seven days ended Jan. 27 from the previous week, followed by a 2.9 percent gain in seafood, according to data from the Ministry of Commerce.


TradingEconomics.com, Bloomberg
1/31/2008 7:50:39 AM