Yuan sets new high against dollar

BEIJING, April 11 (UPI) -- China's yuan, which has been appreciating since its peg to the U.S. dollar ended in July 2005, broke through the 7-to-1 threshold Thursday.

The exchange rate with the U.S. dollar fell below 7 yuan Thursday, the first time that has happened in more than a decade, The New York Times reported.

The trend may lead to making Chinese imports more expensive in the United States and worsen U.S. inflation, experts told the newspaper.

Prior to July 2005, the greenback exchanged for 8.3 yuan, also called renminbi. The peg to the dollar ended that year after complaints both in the United States and Europe that China was artificially keeping its currency low to gain unfair trade advantage to boost its exports and build up a trade surplus.

Things changed this year with China facing soaring inflation, threatening to overheat its economy. To fight that, Chinese leaders have allowed their currency to appreciate more quickly against the dollar, the report said.

Since 2005, the yuan has appreciated 16 percent against the dollar, including about 4.5 percent this year, the report said. Some experts feel the yuan could be trading at 6.5 to the dollar by the end of this year as the latter continues to weaken against other currencies as well.

On the other hand, the yuan appreciation is helping China offset costs of imports like oil, grains and raw materials.