Nov. 9 (Bloomberg) -- The yuan had the biggest weekly advance against the dollar in two years, after U.S. Treasury Secretary Henry Paulson said China is ``out of step'' with the rest of the world's calls for faster appreciation.

The currency climbed 0.6 percent, taking gains to 11.6 percent since the central bank ended a dollar link in July 2005. Paulson, who will travel to Beijing for talks by year-end, said China must step up to its ``global responsibilities.''

``China usually lets the yuan appreciate a bit faster before such meetings,'' said Shen Minggao, an economist at Citigroup Inc. in Beijing. International pressure ``partly caused the yuan's rapid gains recently,'' he said.

A report due as early as today will probably show China's monthly trade surplus topped $30 billion for the first time, adding fuel to complaints that the yuan is undervalued. The Chinese currency has weakened against the Canadian dollar, the British pound and the Australian dollar this year, increasing the cost of commodity imports and fueling inflation.

The yuan climbed 0.13 percent to 7.4108 versus the dollar as of the 5:30 p.m. close in Shanghai, according to the China Foreign Exchange Trade System. This week's gains compared with a 0.57 percent advance last week.

The exchange rate is ``viewed by many countries as a source of unfair competition,'' Paulson said at the China Institute in New York yesterday.

Trade Tensions

Paulson will visit Beijing next month for the third round of the Strategic Economic Dialogue, twice-annual talks with China he set up last year. The yuan had the biggest monthly gain this year in May, when the last such meeting was held.

Before the talks, China announced it would let the yuan rise or fall 0.5 percent against the dollar from a daily fixing rate, up from 0.3 percent. The central bank set the reference rate today at the highest since 2005 at 7.4162.

The yuan has dropped 8.6 percent against the euro since July 2005. European Central Bank President Jean-Claude Trichet yesterday repeated the Group of Seven nation's call last month for the yuan to gain faster.

``Further improving the exchange rate regime is, first and foremost in China's own best interest,'' he said at an event in Frankfurt.

Trichet, along with the head of European finance ministers Jean-Claude Juncker and European Monetary Affairs Commissioner Joaquin Almunia, will travel to China later this month to push for a further strengthening of the currency.

China's trade surplus widened 29 percent in October from a year earlier to $30.8 billion, according to the median estimate of 14 economists surveyed by Bloomberg. Faster yuan appreciation may make exports more expensive, reducing inflows of money that are fueling inflation.

Faster Appreciation

``Faster exchange-rate appreciation would be the best way to manage the excess liquidity,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. ``As we move into the U.S. election season, China's trade surplus will become a more sensitive political issue.''

China's central bank said last night in a monetary-policy report that it will ``strengthen the role of prices in managing the economy'' and improve the coordination of interest-rate and exchange-rate policies. It also said moderate currency appreciation may help to ease inflation pressures.

Consumer prices rose 6.2 percent in September from a year earlier, almost the fastest pace in a decade.

Bonds Fall

Bonds due in less than one year fell as investors expect the central bank to raise interest rates again to ease inflation.

China's inflation rate rose to a decade-high of 6.5 percent in August. The People's Bank of China increased the benchmark deposit and lending rates five times this year to cool the economy.

``There's little cash bond trading these days as we are waiting for the central bank to finally announce its decision,'' said Tian Geng, a bond trader with Guo Hai Securities Co. in Beijing.

Tian said there were relatively more repurchase deals than spot bond transactions as some investors preferred to use short- term bills as collateral to borrow funds in the money market.

The yield on the treasury note due in March rose 1.9 basis points to 2.84 percent, according to the China Interbank Bond Market. The price of the 2.1 percent security was 99.74 per 100 yuan face amount.

To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net.

Last Updated: November 9, 2007 06:55 EST