The yuan's gain against the currencies of its major trading partners in 2008 has exceeded all of last year's advance, as China seeks to slow inflation and fend off criticism from European officials.
The Westpac Nominal Effective Exchange Rate, a trade-weighted index for the yuan that includes the euro and the yen, has risen 3.5 percent, more than last year's 3.4 percent. The index has strengthened 2 percent this quarter, while the yuan's advance versus the US dollar stalled.
China has managed its exchange rate with reference to a similar basket since ending the one to the US dollar in July 2005.
"The yuan is more focused on a basket of currencies instead of just the US dollar," Ting Lu, an economist at Merrill Lynch & Co in Hong Kong, told Bloomberg News. "This is a relatively significant change in mindset of policy makers."
Gains in the yuan may slow against the US dollar and accelerate versus the euro as policy makers combat inflation near an 11-year high and seek to reduce a surplus with Europe, China's biggest trading partner, said Callum Henderson, head of foreign-exchange strategy at Standard Chartered Plc in Singapore. It's "wrong" to suggest China has abandoned its yuan appreciation policy, he said.
The yuan has climbed 2.6 percent versus the euro and 5.4 percent against the yen since the start of April, compared with a 0.2-percent rise against the US dollar. A chart of Westpac's weighted yuan index, which aims to mimic moves in China's currency basket, shows daily fluctuations were in a limited, ascending range since about April 10.
The yuan traded at 6.9946 per US dollar as of 5:30pm in Shanghai, against 7.0030 on Wednesday, according to the China Foreign Exchange Trade System. Against the euro, it traded at 10.8478 from 10.7491 at the end of 2007.
