Economy
Hungary forint to be added to China's foreign currency basket
The weight of the US dollar has been reduced to 22.4% from 26.4% in the index as of 1st January. At the same time, the index will be expanded to include 11 new currencies, which include the South Korean won, the South African rand, the Hungarian forint or the Polish zloty, just to name a few.
The purpose of the renminbi index is to provide a more balanced basis of comparison for the value of the Chinese yuan, thereby making the latter more stable and less dependent on the fluctuations of the US dollar. Compared to the US dollar, the Chinese currency is currently at an eight-year low; on the other hand, it is at its highest in 4 months when compared to the renminbi index. By disengaging the exchange rate of the renminbi from the strength of the US dollar to a certain extent, the Chinese authorities are seeking to maintain currency stability, National Australia Bank analyst Christy Tan commented.
The CFETS press release has highlighted that the foreign currency basket is composed of the currencies of China's major trade partners; the combined weight of the new additions is going to be 21.1%. Among them, the forint will have the second smallest weight at 0.31%, only exceeding the Norwegian krone's 0.27%. The Polish zloty is the other CEE currency to be added, representing 0.66% of the basket. Second to the 22.4% weight of the US dollar will be the euro at 16.3%, with the Japanese yen being the third at 11.5%. The only other currency to exceed the 10% mark is the Korean won.
The purpose of the renminbi index is to provide a more balanced basis of comparison for the value of the Chinese yuan, thereby making the latter more stable and less dependent on the fluctuations of the US dollar. Compared to the US dollar, the Chinese currency is currently at an eight-year low; on the other hand, it is at its highest in 4 months when compared to the renminbi index. By disengaging the exchange rate of the renminbi from the strength of the US dollar to a certain extent, the Chinese authorities are seeking to maintain currency stability, National Australia Bank analyst Christy Tan commented.
The CFETS press release has highlighted that the foreign currency basket is composed of the currencies of China's major trade partners; the combined weight of the new additions is going to be 21.1%. Among them, the forint will have the second smallest weight at 0.31%, only exceeding the Norwegian krone's 0.27%. The Polish zloty is the other CEE currency to be added, representing 0.66% of the basket. Second to the 22.4% weight of the US dollar will be the euro at 16.3%, with the Japanese yen being the third at 11.5%. The only other currency to exceed the 10% mark is the Korean won.
