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Yuan on Record Rally Spree

February 20, 2008 at 12:30 by Andriy Moraru

Chinese yuanToday was the fifth straight day when the Chinese yuan grew against the U.S. dollar and other major Forex currencies after the People’s Bank of China introduced its new anti-inflation policy.

During the China Foreign Exchange Trade System trading session today the Chinese yuan gained 0.1%, rising from 7.1580 to 7.1510 per 1 U.S. dollar. Since the beginning of 2008, USD/CNY lost about 2.2%, which if extrapolated will result in 17.6% yearly growth.

The Chinese currency rose to its record high rate against the U.S. dollar today as it has done yesterday and two days ago. The main reason for such growth lies in the new five-year plan revealed by the country’s central bank. According to this new plan, monetary authorities will target the record fast inflation as a major threat and will use a variety of tolls to slow it down.

The commodity prices grow rapidly throughout the world, including such important Chinese imports as oil and copper, this adds more pressure on the local consumer prices. But since these commodities are valued in dollars, appreciating a national currency allows China to negate this growth.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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