China has welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world’s financial system.
Now the world’s second-largest economy, China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.
FOREX CNY= closed down -0.003 at 6.370. Volume was 10% above average (neutral) and Bollinger Bands were 41% narrower than normal.
Open High Low Close Volume___
6.376 6.379 6.360 6.370 1,350
Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 6.36 6.36 6.27
Volatility: 1 3 3
Volume: 1,838 1,328 1,121
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
Summary
FOREX CNY= is currently 1.6% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of CNY= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on CNY= and have had this outlook for the last 4 periods.
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It now looks likely the yuan will be formally admitted to the IMF’s “special drawing rights” currency basket at the end of the month, which would mark a milestone in China’s efforts to become a global economic power. IMF chief Christine Lagarde said the fund now deemed the yuan “meets the requirements to be a ‘freely usable’ currency” – a key hurdle to joining the yen, dollar, pound and euro as a leading unit in international trade.
The yuan hit headlines in August when China’s central bank devalued the currency and said it would use a more market-oriented system to calculate the point around which the currency can trade each day.
The yuan has rapidly grown in importance in recent years as China – the world’s top trading nation – has used it to settle more of its commerce, and made it directly convertible with more currencies. Including the Chinese currency in the SDR would likely boost demand for yuan-denominated assets among central banks, and give it a sheen of respectability at a time when many investors are questioning Beijing’s ability to manage the slowing economy.
Despite the recent misgivings, there has been strong pressure for the IMF to act now as the SDR basket is only reviewed every five years.
If a decision to include the yuan is made this month, the actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.
The recommendation was broadly backed by the United States, China’s main rival for world economic supremacy.
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