PBOC pegs RMB to 13 currencies
(15 December 2015 – China) China’s central bank has unveiled the China Foreign Exchange Trade System (CFETS) Renminbi (RMB) Index, saying that yuan fluctuations should not be measured against the US dollar alone.
The Index monitors moves against a basket of 13 trading partners’ currencies and was introduced by, an arm of the PBOC that facilitates interbank trading.
The CFETS RMB Index will measure the yuan’s performance against a basket of 13 currencies, with weightings based mainly on international trade, according to the People’s Bank of China (PBOC). The measure has an end-2014 level of 100 as its base level and will be published regularly, it said, without providing details of frequency.
“The mechanism could comprehensively reflect the value change of a country’s currency,” according to statement from the PBOC.
“It has great meaning facilitating the market to observe the change of the RMB’s effective exchange rate from different perspectives.”
The greenback has the greatest weighting with 26.4 percent, followed by the euro and the yen with 21.4 percent and 14.7 percent, respectively. The measure also includes the currencies of Hong Kong, the U.K., Australia, New Zealand, Singapore, Switzerland, Canada, Malaysia, Russia and Thailand.
CFETS will publish two other trade-weighted yuan indexes that reference performance against the IMF’s Special Drawing Rights and a Bank for International Settlements basket. The BIS-referenced gauge contains 40 currencies, while the SDR version has four.
Previously, investors tracked the yuan’s fluctuations against the US dollar, but observing the bilateral RMB-USD exchange rate will not reflect international parity of traded goods by multiple countries.
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