China's central bank said on Wednesday the dollar, euro, Japanese yen and Korean won dominated its new reference currency basket, disclosing the contents for the first time since it revalued the yuan last month.
The basket also included the Singapore dollar, sterling, the Malaysian ringgit, the Russian rouble, the Australian dollar, the Thai baht and the Canadian dollar, central bank governor Zhou Xiaochuan said.
Zhou, in Shanghai to open a central bank office, did not detail the proportions or say whether other currencies were included in the basket.
Premiums on the future value of the yuan against the dollar eased. Dealers trading in such offshore derivatives said that, as they learned more about the basket's other currencies, a rise in the yuan against the dollar no longer looked like such a sure bet.
The market priced the yuan a year from now at 7.8300 per dollar, weaker than the 7.8050 rate seen late on Tuesday, according to broker Prebon Yamane.
Zhou said the weightings had been determined by a raft of data including foreign trade, foreign debt and foreign direct investment from each country, with particular focus on commodities and services.
"The currencies in the basket depend on the amount of foreign trade we conduct. The US, eurozone, Japan and South Korea are our biggest trading partners now," Zhou said in a prepared speech ahead of the opening ceremony.
"Hence, their currencies are naturally the main ones in the basket," he said in the statement that was obtained by Reuters.
Deutsche Bank currency strategist James Malcolm estimated the dollar would be the largest component of the basket, with a 30 percent weighting. The euro and yen would likely take up 20 percent each and the won 10 percent, he added.
The yuan was revalued by 2 percent last month. Based on that estimated basket, it had fallen 1 percent in trade-weighted terms since, Malcolm added.
After having kept the yuan virtually fixed near 8.28 per US dollar for the last decade, China's central bank adjusted its value to 8.11 last month and said it would manage it by reference to a basket of currencies of its main trading partners.
"Compared with our previous peg against the dollar, the basket better reflects the changes between the yuan and other major currencies," Zhou said.
"This is meant to overcome the dollar's instability, to reduce the fluctuations of the yuan against other currencies, and to maintain the stability of China's foreign trade."
Zhou failed to mention Taiwan's currency as an element of the basket, even though economists said that, after adjusting for re-exports, the island was China's fifth-largest trading partner.
"That's more of a political issue," said Standard Chartered economist Tai Hui. "Because of the politics, Taiwan wasn't included."
Zhou also said on Wednesday that the country's debt owed to foreign countries would increase as the economy expanded. At the end of 2004, China's foreign debt stood at $228.6 billion, he said.
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