In Asian deals on Friday, the Chinese yuan broke its psychologically important level of 6.50 against the dollar for the first time since 1993 on speculation the central bank will continue to let the yuan strengthen more as a way of battling inflation.
The consumer price inflation in China continued to hover above the government’s target of 4 percent despite several measures taken by the government and the central bank.
The People’s Bank of China has raised interest rates twice this year and hiked the reserve requirement three times in 2011 after raising it six times last year.
In March, consumer price inflation rose to 5.4 percent, the highest since August 2008, from 4.9 percent in February. The inflation also came in above the 5.2 percent forecast by economists. Food prices surged up 11.7 percent, while the increase in non-food prices was a tamer 2.7 percent. However, consumer prices fell 0.2 percent on a monthly basis in March.
Meanwhile, annual inflation for the first quarter came in at 5 percent, with an increase of 4.9 percent in cities and 5.5 percent in rural areas.
The dollar’s slide this week on U.S. Federal Reserve’s commitment to keep rates near zero-levels for an extended period also boosted the Chinese currency.
The yuan rose to a fresh record high of 6.4805 against the dollar at 9:50 pm ET, but it has come off slightly thereafter. The yuan is now worth 6.4907 per dollar.
The People’s Bank of China set today’s central parity rate for the yuan at a fresh record high of 6.4990 per dollar, compared to Thursday’s daily reference rate of 6.5051.
A survey by Markit Economics showed today that China’s manufacturing sector expanded at a steady pace in April, amid relatively lackluster growth of new business and a slower expansion in manufacturing production.
The Markit/HSBC purchasing managers’ index was at 51.8 during the month. The reading was unchanged from the March score and the flash estimate.