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- Yuan makes biggest weekly gain
Date: 5-Nov-2007 Sources: (Shenzhen Daily)
THE yuan made its biggest weekly gain since the revaluation in 2005 on speculation the central bank wants the currency to appreciate to tackle inflation as crude oil prices reached records.
The government raised Thursday domestic fuel prices by as much as 10 percent, putting pressure on inflation that is near the fastest in 11 years.
Yuan gains would help lower the cost for purchasing oil for a nation that imports about 50 percent of what it needs to meet domestic demand. The currency rose 0.54 percent last week, reaching the strongest since a link to the U.S. dollar was scrapped in July 2005.
'Oil is a major import of China and high oil prices will eventually filter through to higher domestic prices as well,'' said Nizam Idris, a currency strategist with UBS AG in Singapore.
'They need to let the yuan strengthen basically,'' Idris said.
The yuan was at 7.4558 versus the dollar in Shanghai on Friday. The currency is expected to strengthen to 7.35 by the end of the year, Idris said.
The yuan is allowed to fluctuate within a 0.5 percent range against the dollar from a level set daily by the central bank.
The yuan has strengthened each week since the Group of Seven nations called for faster appreciation in the yuan Oct. 19.
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