China’s yuan may become the fifth currency in the IMF’s Special Drawing Rights (SDRs) basket by October 2016, the ICCB said in the editorial of its news bulletin yesterday.
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“Some state-owned banks sold small amounts of dollars in onshore market intermittently to support the yuan”. “The spread between the two markets thus converged a little bit”. ― File picBEIJING, October 28 ― The yuan traded in Hong Kong fell to a one-month low as China’s central bank cut its daily fixing for the first time this week, spurring speculation it will allow the currency to drop in the coming days. On Thursday afternoon, it was trading at 6.3555 to the dollar.
The report added that if the renminbi is included in the SDR basket, it will be placed in the foreign currency portfolio of other countries’ central banks and will reduce the share of the USA dollar as the world’s reserve currency.
But they may need to raise an additional 553 billion yuan ($87.07 billion) if a slowdown in the economy pushes the ratio of non-performing loans (NPLs) from 1.5 to 4 percent, according to calculations by Barclays’ banking analyst Victor Wang.
The total value of bad loans at Chinese banks surpassed 1 trillion yuan in the first half of this year for the first time since 2008, representing 1.5 percent of all issued loans, according to the China Banking Regulatory Commission.
Strong demand from Hong Kong investors to switch their yuan deposits to the local currency has also pushed the HKMA to frequently inject Hong Kong dollars to the market to protect the local unit’s peg to the US dollar.
“The central bank wouldn’t tolerate a wider gap, so offshore intervention is possible”, said Tommy Ong, managing director for treasury and markets at DBS Hong Kong Ltd. “China is committed to having a high degree of capital-account openness”.
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Japanese Finance Minister Taro Aso on Tuesday offered conditional support to China’s yuan joining the worldwide Monetary Fund’s currency basket.
