China to increase dollar and euro weights in core yuan index basket

HONG KONG, Dec.31 (Reuters) – China will adjust the weights of a basket of key yuan indices in 2022, the country’s currency trading platform said on Friday, to an extent that traders and analysts say , would help ensure that the value of the yuan does not act as a brake on Chinese exports.

From January 1, the China Foreign Exchange Trade System (CFETS) will increase the weight of the US dollar in the CFETS basket of currencies to 19.88% from 18.79% and increase the weight of the euro to 18.45 % against 18.15%, according to an online statement.

Increasing dollar and euro weights are unlikely to create much volatility in yuan trading, although this may affect setting the official midpoint of the yuan, from which the spot price is allowed. to increase or decrease by 2%.

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The CFETS index (.CFSCNYI) ended the year at 102.47, up 8.05%, while the Chinese currency strengthened about 2.8% against the dollar in 2021, in moving to become the best performing emerging market currency.

China has adjusted the CFETS basket several times since it introduced the trade-weighted yuan exchange rate index in December 2015 to better reflect foreign trade conditions.

The trading platform also said it would keep the weighting of one yuan index based on the BIS basket of currencies and one based on the SDR basket unchanged.

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Reporting by Meg Shen; Editing by Kevin Liffey and Hugh Lawson

Our Standards: Thomson Reuters Trust Principles.

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