The Chinese yuan is expected to rise this week on expectation of higher inflation figures in January.

The National Statistics Bureau is scheduled to post the January consumer price index tomorrow. Economists widely expected the index, a common inflation gauge, to top more than seven percent due to the seasonal increase in demand and the impact from the worst snowstorm in 50 years.

The Chinese yuan ended at 7.1825 on Friday compared with Wednesday's opening of 7.1952, the first trading day after the week-long Chinese Lunar New Year holiday. It is the yuan's highest level since the decade-long peg to the greenback was scrapped in 2005.

Foreign exchange rates will be a major weapon to fight inflation in China now.

The interest rate spread between the yuan and the US dollar has curbed China's room to use interest rates to fight inflation.

(Shanghai Daily February 18, 2008)