China to Focus on Basket Currencies for Foreign Exchange

Hu Xiaolian, Deputy Gov. of the People's Bank of China, has suggested that a group of currencies should be chosen for Yuan's foreign exchange. She said that this would enable Yuan to reflect the trading fundamentals in a better manner with most of its trading partners.

Hu said that the exchange rate with more than one currency will settle the balance of payments of the country more efficiently.

It will also regulate the export and import in an effective manner. She said that only Dollar-Yuan exchange is a hindrance in the way of China's much larger trade. China had the huge currency assets of $2.5 trillion till June.

These comments from Hu did not affect Yuan in market.

"The floating cannot be aimed to adjust bilateral trade balance, and it is not advisable to just look at the Dollar-Yuan exchange rates", said Hu.

In the procedure only, The People's Bank of China has also declared that China would be exchanging currency with Singapore for three years at the rate of 150 billion Yuan or $30 billion. This exchange between the two countries will smooth the progress of business between them.

The central bank has also finalised such exchanges with Indonesia, Argentina, Malaysia, Belarus, Korea, and Hong Kong.