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IMF decision on yuan on Monday may clear path for further weakness

IMF-Washinton

China´s yuan is expected to this week be unveiled as the newest member of the group of currencies which the International Monetary Fund includes in its special drawing rights, possibly foreshadowing further weakness in the currency.
The IMF was believed to be planning to make the announcement about the Chinese currency on Monday.

If the decision went ahead, it would mean that the yuan would reach reserve status sometime next year, according to some observers.

China put in the request to be added to the basket of currencies used by the Washington based lender´s special drawing rights in 2014.

To be successful, it would have to meet a strict set of criteria that only the pound, the euro, the US dollar and the Japanese Yen had so far been able to achieve.

“Monday’s IMF Board review on CNY SDR inclusion is important because following the successful SDR inclusion, China may further loosen its grip on the CNY and allow material currency depreciation over the coming year. We remain long USDCNH via call spreads,” economists at Barclays said in a research note sent to clients on 27 November.
In recent weeks, some analysts, such as those at Bank of America-Merrill Lynch, had forecast the Yuan would weaken in 2016 by more than financial markets were discounting, which might weigh on the commodity space, including on the price for copper and oil.

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Bella Palmer

The author Bella Palmer

Passionate about the Investment Market. I am also a keen Investor myself. Love to travel and dance.