Yuan at Highest Rate since 2005

The Chinese yuan rose to its new highest rate against the U.S. dollar since the end of a currency’s peg to the dollar in 2005.

The dollar weakened on the international currency market this week as a lot of the disappointing macroeconomic statistics along with the Fed’s readiness to cut the interest rate pressed on the U.S. currency. Meanwhile high inflation rate in China pressed on the government for a faster yuan’s appreciation.

The annual inflation rate in China jumped to the record high 8.7% in February from the 7.1% rate in January (which was already intolerably high at that time).

The historically low value of the U.S. dollar forces many Chinese residents and foreign investors to convert to the local currency in order to minimize the Forex losses. This helps the government to accelerate the yuan’s appreciation as the demand for it is significantly higher now.

The USD/CNY currency pair traded at 7.0860 as of 9:17 GMT, compared to the close rate of 7.0920 of the previous day. The daily minimum (and the record low value for the pair) was at 7.0845 at 8:46 GMT.

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