The Yuan rose past seven to the dollar for the first time since China abandoned the fixed exchange rate in 2005 as the country seeks to slow inflation and reduce trade surplus.
China has allowed a 4.5 percent gain in the currency this year, more
than half the gain for all of 2007. It is said that China is starting
to deal with the problem of inflation by allowing the Yuan to
appreciate now at a faster rate. US Treasury Secretary Henry Paulson
last week said China's currency needs to reflect economic fundamentals.
“A stronger Yuan may also help to prevent the economy overheating by
lowering import costs and raising export prices.”
The Yuan was set to trade at 6.9920 against the US dollar on Thursday
in contrast to the closing price of 7.0017 on Wednesday according to
China Foreign Exchange Trade System. It is predicted that the Yuan will
trade at 6.3 by year end.
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