Yuan to see greater volatility if won and rand are brought into its basket of currencies
Chinese yuan may become daily more volatile against the US dollar if the Korean and South African currencies are included in the basket that the yuan tracks, HSBC Global Research said in a report.
China’s currency may become more volatile against the US dollar if the Korean won and South African rand are included in the basket of currencies that the yuan tracks, HSBC Global Research said in a report.
Media reports have said the Korean and South African currencies will start direct trading against the onshore yuan on the China Foreign Exchange Trade System (CFETS) in coming weeks.
That indicates the two currencies will be included in the CFETS RMB Index as well, which comprises a basket of currencies the yuan follows and was published by the People’s Bank of China, the country’s central bank, on November 30 last year.
The index debuted at 102.93 six months ago and slid to 96.98 as of May 13, according to latest data from CFETS, while the yuan against the greenback has weakened 2.1 per cent.
Paul Mackel, head of emerging market foreign exchange research at The Hongkong and Shanghai Banking Corporation (HSBC), along with three colleagues, said in a report that daily volatility of the onshore yuan against the US dollar could pick up slightly with such a new basket.
“Even amid more normal market conditions, the daily volatility in the yuan against the US dollar could pick up slightly” after the introduction of the won and rand, the HSBC report said.