Dollar reaches record low against Chinese currency

SHANGHAI: The yuan traded stronger than 7.00 against the U.S. dollar on Thursday for the first time in over a decade, underlining China's growing economic strength and its increasing use of the currency as a policy tool.The central bank, which tightly controls the foreign exchange market, paved the way for the rise by fixing the yuan's daily mid-point, or reference rate, at a fresh high of 6.9920 before trade began.The yuan opened at 6.9920 against the dollar compared to 7.0017 at Wednesday's close. It was the first trade above 7.00 since China devalued the yuan to 8.7 from 5.8 at the start of 1994, creating a modern foreign exchange market.Since the yuan's peg to the dollar was abolished in July 2005, its appreciation against the U.S. currency has accelerated each year, from 2.6 percent in 2005 to 3.4 percent in 2006 and 6.9 percent in 2007. So far this year, it is up 4.5 percent.The acceleration is partly due to the weakness of the dollar in global markets, and to diplomatic pressure by China's major trading partners for faster appreciation to cut the huge Chinese trade surplus.U.S. Treasury Secretary Henry Paulson, visiting Beijing last week, praised China for letting the yuan rise more quickly over the last several months, adding that the trend should continue.But analysts believe the main impetus for fast appreciation is a shift by China toward managing its currency in the same way as developed economies, allowing big swings to cool the economy when it overheats and stimulate it during slowdowns.Last November, the central bank declared for the first time that it would use the exchange rate actively to fight mounting inflation, which rose to an 11-year high of 8.7 percent in February this year.
http://www.iht.com/articles/2008/04/10/business/10yuan.php

As in the days of Noah....