China's soaring currency, the yuan, hit its highest level today since the US dollar peg was abandoned in 2005.

On Wednesday trading, the yuan jumped 0.23 per cent to 7.0283 against the dollar after the Government’s decision to set a higher minimum wage in the booming city of Shanghai.

The yuan has crept 3.8 per cent higher against the dollar so far this year.

But the rising yuan is seen as one solution to the growing inflation problem, and the central bank is hoping to encourage the upward pressure on its currency.

Last week Wen Jiabao, the Prime Minister, admitted that the official inflation target of 4.8 per cent would probably not be met, and vowed to take “appropriate and forceful” action against inflation.

The Chinese Government seeks to cool inflation before it gets out of control and rein in export growth before the trade surplus becomes unmanageable.

China is a massive importer of raw materials, and is heavily exposed to soaring commodity prices.

The Taiwanese dollar hit a ten-year high today, and central bankers in Taipei are understood to have taken the unorthodox step of asking big investment banks not to publish currency forecasts.

Investment bankers told The Times that they had been under “intensifying official pressure” not to release bullish forecasts on the Taiwanese dollar amid concerns that targets published by analysts would become self-fulfilling prophecies for currency traders.

The same sources said that the requests would almost certainly be ignored.

The recent surge in the Taiwanese dollar follows last weekend’s election and the victory for the opposition Nationalist Party.

A commanding legislative majority, a bold economic reform programme and hints of closer business ties with mainland China have provoked a surge of investment interest in Taiwan and a 7.4 per cent jump in the value of the its dollar against its US counterpart since January.

But the speed of that advance has caused huge headaches for Taiwan’s central bank, which fears that the sharp rise in the currency will destroy the competitiveness of the nation’s vital export economy.

The central bank has been intervening in currency markets — selling Taiwanese dollars in favour of the greenback — and is known to have pressured overseas investment banks to tone down their renewed bullishness on the Taiwanese dollar.

The central bank is also understood to be concerned that much of the recent stock-buying on the Taipei exchange has been a simple currency play by foreign investors, who will become heavy sellers if the dollar begins to slip back.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive