On Friday, China's currency the yuan, broke past 6.50 against the US dollar, its highest official level since a currency revaluation in 2005.

Surging inflation that trigger protests in Shanghai prompted China's leaders to speed up the rise of the country's tightly controlled currency.

The move came less than two weeks before the scheduled economic talks between the US and China where the US is expected to continue to press China to allow the yuan to appreciate at a faster pace.

The US and the EU were concerned that the Chinese has been keeping its currency artificially low to help its exporter sell products or services abroad.

Although the Chinese government has been allowing the yuan to slowly appreciate at almost 5% against the US in the last year, the Chinese currency remains undervalued compared to currencies like the euro and US dollar.

With Friday's gains, China's currency has strengthened by 27.5% since 2005, when Beijing revalued the currency, effectively ending its peg against the US dollar.

In the aftermath of the financial crisis that policy of gradual appreciation was temporarily frozen in 2008 ignoring demands from the US to ease currency controls.

The currency appreciation will be used by China's leaders to counter imported inflation. The flexibility of the yuan's exchange rate will ease price pressures, but Premier Wen Jiabao, China's top economic official, gave no details or a target for the yuan's value.

A stronger yuan could help ease inflation by making oil and other imports cheaper. But Beijing also worries that a rising yuan might hurt exports and lead to job losses and unrest.

Traders and currency strategists, meanwhile, believe the move is a sign that China's central bank is prepared to allow the currency to appreciate further.

China's central bank actively guides the level of the yuan, by effectively setting the rate at which it is allowed to trade.#30