New | China’s yuan loses ground after milestone IMF reserves inclusion
In offshore trades, the yuan was weaker in the wake of the landmark IMF decision
The Chinese yuan has depreciated in the wake of a milestone decision by the International Monetary Fund to include the currency in an elite group.
Offshore yuan (CNH) depreciated by over 150 basis points, or 0.24 per cent, to 6.4413 per US dollar in the early hours of Tuesday, shortly after the IMF announced that it would include the currency in the Special Drawing Rights (SDR) basket, and give it a weighting greater than the Japanese yen and British pound.
The decision, effective October 1 next year, is “a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems,” IMF managing director Christine Lagarde said in a statement.
The yuan has been given a weighting of 10.92, placing ahead of the British pound at 8.09, and Japanese yen at 8.33, though trailing the euro at 30.93 and US dollar at 41.73.
In offshore markets the yuan later rebounded to 6.4369, with the onshore yuan was trading slightly weaker at 6.3982. The People’s Bank of China set the midpoint at 6.3973, 11 basis points weaker than yesterday. The gap between the two stands around 400 basis.
“The IMF decision is a historical event. Since the SDR is an international reserve asset created by the IMF to supplement member countries’ official reserves, today’s decision means that the RMB becomes a globally recognisable reserve currency,” ANZ said in a report.
