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Yuan Advances Past 7 to Dollar,
First Time Since End of Link
Judy Chen and Kim Kyoungwha
Bloomberg
Thursday, April 10, 2008
The yuan rose past 7 to the dollar for the first time since China
scrapped its fixed-exchange rate in 2005 as policy makers accelerate
gains to cool inflation at an 11-year high.
The currency strengthened as much as 0.16 percent to 6.9907,
bringing the yuan's advance to 18.4 percent since the end of the
peg. U.S. Treasury Secretary Henry Paulson said last week in Beijing
it was ``dangerous'' for the exchange rate not to reflect the
fundamentals of the world's fastest-growing major economy.
A stronger yuan helps reduce the cost of food imports and slows
the nation's export-led expansion. China's consumer prices jumped
8.7 percent in February from a year earlier on higher food costs,
raising the risk of unrest as Beijing prepares to host the Olympic
Games this summer.
(Article continues below)
``Inflation can be a very serious threat,'' said Naomi Fink,
senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd. in
Tokyo, who forecasts the yuan will reach 6.3 in a year. ``Certainly,
China will keep accelerating the pace ahead of the Olympics and
I don't think the authorities really want runaway inflation.''
The yuan rose 0.14 percent to 6.9916 at the 5:30 p.m. close in
Shanghai, according to the China Foreign Exchange Trade System.
The yuan has taken less than six months to break 7 to the dollar
after taking 1 1/2 years to climb to 7.5 from 8. Forward contracts
show traders are betting on an 11.2 percent advance to 6.2898
in the next 12 months.
The currency's gain against the dollar since the peg ended compares
with 5.5 percent for the Taiwan dollar, 9 percent for India's
rupee and 34 percent for the Philippine peso. The yen has climbed
11.9 percent and South Korea's won 6 percent.
Full
article here.
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