Jan. 18 (Bloomberg) -- The yuan headed for a sixth weekly gain, the longest stretch in seven months, on speculation China is allowing the currency to appreciate to cool the economic expansion and bring inflation down from an 11-year high.
The currency's advance so far this year is the best since China abandoned a link to the dollar in July 2005. The nation has increased interest rates and told banks to set aside more funds as reserves to slow growth that is the fastest of any major economy by reducing the cash available for investment.
``The yuan will remain one of their key tools to fight inflation,'' said Sean Callow, a foreign-exchange strategist at Westpac Banking Corp. in Singapore. ``There will be bursts of strength then periods of slower gains.''
The yuan rose 0.18 percent to 7.2488 against the dollar this week as of 12:22 p.m. in Shanghai, the longest run of weekly gains since June 1. Westpac forecasts the currency will strengthen to 6.98 by year-end.
``While the yuan is treading water short term, I think we will see reacceleration over the next one-two months, unless there is a sharp, unexpected slowdown in China's economy, which virtually no one expects,'' Callow said.
`Some Progress'
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