Oct. 28 (Bloomberg) -- The yuan advanced the most in two months this week on speculation policy makers will tolerate gains after Premier Wen Jiabao vowed to rein in inflation in Asia’s largest economy.
Curbing increases in food and housing prices remains the government’s top priority, Wen said on Oct. 22. The People’s Bank of China set its daily reference rate 0.29 percent higher at 6.3290 per dollar today, the biggest increase since November. Stock indexes rallied across Asia after Europe announced measures to contain the region’s debt crisis.
“The record fixing shows China’s determination to tackle inflation as a stronger currency can lower import costs,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. “Market sentiment got a boost after Europe reached an accord.”
The yuan gained 0.4 percent this week, the most since the five-day period ended Aug. 12, to close at 6.3586 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It advanced 0.01 percent today.
In Hong Kong’s offshore market, the yuan advanced 0.3 percent today and 0.7 percent this week to 6.3799 per dollar. Its discount to the onshore rate narrowed to 0.3 percent from last week’s 0.6 percent. Twelve-month non-deliverable forwards increased 0.4 percent today to 6.3500, the strongest level since Oct. 11.
Consumer prices rose 6.1 percent last month from a year earlier after having increased 6.2 percent in August, according to official data. The inflation rate has exceeded the government’s annual target of 4 percent every month this year.
French President Nicolas Sarkozy spoke yesterday with Chinese President Hu Jintao to seek support from the country with the world’s largest currency reserves to help contain the euro-region debt crisis. Hu hoped the measures will help to stabilize markets, state-owned China Central Television reported.
--Editors: Ven Ram, Simon Harvey
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