The Chinese yuan extended its gain against the U.S. dollar today reaching the 20 percent appreciation since the end of the peg in 2005 as the new meetings of the U.S. and Chinese financial officials will be held soon.
The yuan’s gain for the period since July 21 2005 can be compared with 29 percent gain of euro versus dollar for the same period. Great Britain pound rose 13.2 percent and the Japanese yen made it 4.7 percent for the same 35-month period.
The current pace of the yuan’s appreciation is seen as the only way to slow down the accelerating inflation by the many currency strategists in the Wall Street.
As the international trade balance surplus widens in China and the foreign reserves grow the monetary base in the country threaten to press on the consumer prices. Chinese government urges banks to set aside bigger reserves as one of the measures to fight the inflation. Further decreasing of the yuan supply can lead to its continuous strengthening.
USD/CNY declined today from 6.9004 to 6.8959 today according to the China Foreign Exchange Trade System. The decline of the currency pair is at 1.7 percent so far in the second quarter.
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