China is hoping that the move will increase desirability on the Yuan among investors.
30 November 2015 14:34
Brilio.net/en - China has been pushing hard for its national currency, the Yuan to be considered an international currency on par with the US dollar.
In its effort, the world's second largest economy has received a major boost with the International Monetary Fund (IMF) likely to add the Yuan into its special basket of international currencies.
Shareholders of the IMF will vote on whether they would install the Chinese currency as the fifth member of its special drawing rights currency alongside the US dollar, Japanese yen, British poundsterling, and the euro.
The direct impact wont be felt in the near term, not least because implementation of the new basket wont be until Q3 2016. However the symbolic importance cannot be overlooked, said Andrew Malcolm, Asia head of capital markets at law firm Linklaters.
By effectively endorsing the renminbi as a freely useable currency, it sends a strong signal about Chinas importance in the global financial markets.
The confidence shown towards the yuan will likely relieve Chinese authorities as it seeks to push forward in attracting more investors.
The credit ratings agency Fitch has said"[we] do not expect this to lead to a material shift in demand for renminbi assets globally in the short term. Over time, the emergence of the renminbi as a global reserve currency could support the credit profile.
Analysts at the Nomura bank in Japan has predicted that the Chinese yuan will become the top three major international currencies alongside the US dollar and the euro by the year 2030.
