CHINA'S currency posted a monthly gain as the central bank signaled that containing inflation is still its top priority rather than supporting economic growth.

The yuan has risen 19.2 percent versus the US dollar since a dollar link was scrapped in July 2005, as the government seeks to reduce a record trade surplus and cut the cost of imports. The People's Bank of China said last Friday that inflationary pressures remain high, Bloomberg News reported.

"The government has few options to tame inflation other than accelerating yuan appreciation," said Wang Qian, an economist at JPMorgan Chase & Co in Hong Kong. "A stronger currency reduces import costs of oil and food, which effectively eases inflationary pressure."

The currency, little changed last Friday, advanced 0.66 percent last month to 6.9420 per US dollar in Shanghai, compared with 6.9875 on April 30, according to the China Foreign Exchange Trade System.

Local governments should give more priority to damping inflation that quickened to 8.5 percent in April from 8.3 percent in March, the central bank said in a regional finance report for 2007, published on its Website last Friday.

China's economic growth may slow "moderately" in 2008 due to weakening global demand and disruptions from disasters, the report said.

China's currency regulator has boosted surveillance of speculative capital into the country, the South China Morning Post said last Thursday, citing unidentified people.

The State Administration of Foreign Exchange has asked banks in Shenzhen to report deposits of more than 50,000 yuan (US$7,203) by non-mainland residents, the Hong Kong-based newspaper reported.