HONG KONG: China will adjust the weightings of a key yuan index basket in 2022, the country's foreign exchange trading platform said on Friday, in a move traders and analysts said would help ensure the yuan's value does not act as a brake on China's exports.
Starting on Jan. 1, the China Foreign Exchange Trade System (CFETS) will increase the US dollar's weighting in the CFETS currency basket to 19.88% from 18.79% and raise the euro's weighting to 18.45% from 18.15%, according to an online statement.
Raising the dollar and euro's weightings is unlikely to create much volatility in yuan trade although it may affect the setting of the yuan's official daily midpoint fixing, from which the spot price is allowed to move 2% higher or lower.
The CFETS index finished the year at 102.47, up 8.05%, while the Chinese currency strengthened about 2.8% against the dollar in 2021, on course to become the best-performing emerging market currency.
China has adjusted the CFETS basket multiple times since it introduced the trade-weighted yuan exchange-rate index in December 2015 to better reflect external trade conditions.
The trading platform also said it would keep the weighting of a yuan index based on the BIS currency basket and another based on the SDR basket unchanged.
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