The inclusion of the Chinese yuan in the International Monetary Fund’s elite basket of reserve currencies will attract overseas investment and help stabilise the local currency in the long run, an influential state-run newspaper said on Thursday.
The commentary in the Economic Information Daily comes after the yuan fell nearly one percent over the past three days following weeks of steady trade, raising questions about how far the central bank was willing to let it decline.
Traders and economists had speculated that authorities wanted to keep the yuan stable ahead of its Oct. 1 inclusion in the IMF’s Special Drawing Rights basket, but have allowed it to fall since the end a week-long national holiday.
“The yuan’s inclusion in the basket was a ‘major event’ for the forex market and it created more reasons for volatility in a market that is very sensitive to all kinds of information,” said the newspaper, which is run by the state news agency Xinhua.
“But the yuan’s inclusion in the basket is more of a symbolic event that will have an impact on market sentiment in the short term but cannot change the basis for yuan exchange rate movements.”
In part, the yuan’s fall has been fuelled by a stronger dollar. The currency has also been under pressure for months as growth in the world’s second economy has stuttered.
The newspaper commentary said it did not believe the yuan was poised for long-term depreciation.
“But as the exchange rate becomes more market oriented, two-way volatility of the yuan exchange rate will be inevitable in the short term,” it said.