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When yuan strength is really dollar weakness

A senior official of the People’s Bank of China last week argued that China should let the yuan appreciate to blunt the impact of rising raw materials prices on the domestic inflation rate, as I reported Monday.

The Chinese currency climbed to a three-year high against the US dollar, just above the 6.4 yuan/dollar mark.

Is the yuan strengthening, or is the dollar weakening? For the time being, it looks like dollar weakness. China’s monetary authorities have kept the yuan fairly stable against a basket of currencies of China’s major trading partners, and the yuan/dollar rate has tracked the euro/dollar rate fairly closely up through Monday’s trading session.

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