MercoPress. South Atlantic News Agency

China's Yuan upward march against US dollar

China's Yuan climbed to the strongest since a fixed exchange rate was scrapped in 2005 on speculation China's central bank will seek a stronger currency to slow the economy, after raising interest rates.

Gains in the Yuan against the dollar, which on Monday reached 7% since the end of the peg, would help reduce demand for Chinese goods by making them costlier abroad. The impact of the central bank's third rate increase in 11 months, announced on March 17, may be limited because inflows of foreign exchange into the economy are helping to drive lending. The currency gained as much as 0.04% to 7.7331 against the dollar and traded at 7.7360 in Shanghai, according to the China Foreign Exchange Trade System. The People's Bank of China lifted the benchmark one-year lending rate by 0.27 percentage point to 6.39%. Banks aren't allowed to charge rates more than 10% lower than that level. The deposit rate was raised by the same amount to 2.79%. Central Bank Governor Zhou Xiaochuan said, as reported by Emerging Markets. There's a "high probability" China will avoid a hard landing, Zhou added, speaking in Guatemala City. Prices rose 2.7% last month from a year earlier, compared with 2.2% in January. The US and Europe want the Yuan to strengthen faster to make China's exports more expensive and ease global imbalances. The US had a record deficit in 2006 for a fifth year on imports of Chinese goods, whilst China's trade surplus swelled 74% last year to a record 177.5 billion US dollars. Measures in China apparently are working, with growth in spending on factories and real estate slowing to 23% in the first two months of the year from a peak of 31% in the first half of 2006. China's economy, the world's fourth-largest, expanded at the fastest pace in 11 years in 2006. China's Yuan has advanced every month bar one since the dollar link was scrapped, maintaining a commitment for gradual appreciation.