Weak dollar pushes yuan to record high again

Updated: 2008-01-28 13:56

The Chinese currency, the yuan, jumped to a new high of 7.1996 per US dollar on Monday, despite a mild rebound of the dollar last Friday.

It was its fourth rise in as many trading days, and also the 11th time has hit new highs against the dollar since the beginning of this year.

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The central parity rate of the yuan, also called the renminbi, was up 69 basis points overnight, the China Foreign Exchange Trading System reported.

The Chinese currency has continued to rise since the Federal Reserve slashed the benchmark federal funds rate by 75 basis points to 3.5 percent last Tuesday, in an emergency rate cut aimed at averting a US recession.

Many investors expected a further interest rate cut when the Fed meets this week, although they lowered their expectations to a 25 basis points cut from an earlier 50 basis points.

The dollar also remained weak despite the possibility of an economic stimulus plan of about 150 billion US dollars to boost the economy by the US government.

Analysts believed the high growth rate of the Chinese economy, which expanded by 11.4 percent in 2007, and the mounting inflation pressure also helped in driving the currency up.

Chinese officials announced last Thursday the country's December inflation rate remained high, at 6.5 percent, while the annual rate was pushed to 4.8 percent. Both were well above the government target of three percent.

Observers said they believed that the Chinese government would seek to allow the currency to appreciate faster to limit inflation.

The yuan has appreciated more than 12 percent since the peg to the US dollar ended in July 2005.

The yuan also gained 793 basis points against the euro on Monday to report a rate of 10.56 yuan against one euro, as the euro fell against the US dollar following news of a 7-billion-dollar fraud in French bank Societe Generale.

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