The yuan rose to the highest level since the end of a dollar link in 2005 as the dollar weakened and China sought to combat inflation at an 11-year high. Government bonds gained.

China's yuan climbed as the U.S. currency touched a record low against the euro on concern increasing credit- market losses will drag the world's biggest economy into a recession. China's annual inflation rate accelerated to 8.7 percent last month from 7.1 percent in January, the government said March 11.

``The recent fall in the dollar may have hurt people's confidence and driven them to convert dollars to renminbi,'' said Wen Li, a foreign-exchange trader at Bank of China Ltd. in Beijing. The yuan is a denomination of the renminbi.

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The yuan was at 7.0894 per dollar as of 5:30 p.m. in Shanghai, compared with a close of 7.0900 yesterday, according to China Foreign Exchange Trade System. It touched 7.0844, the strongest since the dollar peg was scrapped in July 2005.

The People's Bank of China set the daily reference rate for its currency at 7.0882 per dollar today. The yuan is allowed to trade by up to 0.5 percent on either side of that.

``If the dollar continues to be weak, the yuan reference rate will keep rising at a slow pace until the National People's Congress ends its meeting on March 18,'' said Yang Shengkun, a foreign-exchange analyst at China Citic Bank Co. in Beijing.

The National People's Congress, China's parliament, began its annual meeting in Beijing on March 5 to formulate laws and appoint officials.

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