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China is set to reduce dollar’s influence on yuan trading basket
Bloomberg reports that the dollar’s influence on how China sets its yuan exchange rate is expected to decrease again this year.
A branch of China’s central bank factors in the moves of a basket of trading partners’ currencies when setting the yuan’s daily reference rate. The weighting of each of the 24 components in the CFETS RMB Index is adjusted based on the proportion each nation took in total trade with China the previous year.
The greenback’s share is currently the highest in the basket, at slightly more than a fifth. But it has been declining since 2015. Last year, the U.S. accounted for 17.8% of China’s two-way shipments with the 24 peers last year, down from 20.5% in 2018, according to data compiled by Bloomberg. China is expected to adjust the basket by the end of the year.
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