January 10, 2017

RMB Roadmap 2017

Over the medium term, the use of the RMB as both a trade settlement currency as well as a reserve currency remains a priority. This suggests the scope for an eventual “strong RMB policy".

After a 5-year long trudge through a host of liberalization measures affecting many aspects of the RMB’s management, China was rewarded with reserve currency status for its currency. The immediate aftermath of the decision probably did not go as the authorities might have liked, with volatility in the USD/CNY and USD/CNH markets increasing significantly. In the first month of 2017, the RMB has seen even larger two-way volatility.Over the medium term, the use of the RMB as both a trade settlement currency as well as a reserve currency remains a priority. This suggests the scope for an eventual “strong RMB policy”. In the meantime though, the authorities seem to have settled on an FX regime that swaps the tight bilateral link with the USD with a looser link between the RMB and USD as measured against a basket of currencies.

For full analysis, download report: RMB Roadmap 2017 (PDF, 4MB)

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