The executive committee of the International Monetary Fund is meeting on Monday to decide whether to accept the yuan into the SDR basket
- Its pretty close to being a certainty for admission
- But, there are questions about its weighting in the basket of Special Drawing Rights
- IMF staff have estimated a 14-16% weight, the market is around 10% (the market is lower due to concerns over the limited usability of the currency)
- If the weighting is, in fact, announced around 10%, there are some views it will trigger a move in USD/CNH to around 6.45 and even as high as 6.5
Mizuho Bank strategist Ken Cheung:
"A weight below 10 percent would probably be interpreted as a less significant reserve-currency status for the yuan and less capital inflows to yuan-denominated assets would be implied, putting the currency under pressure"
Bloomberg will have more, but no link yet
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ps. 'CNH' is the 'offshore' yuan, which is free to trade wherever it likes. CNY, on the other hand, is limited to a +/- 2% band around each day's mid-point set by the PBOC
