IMF backs Beijing's yuan move, eyes floating forex rate in 2-3 years

Tokyo

THE International Monetary Fund has welcomed the change in the way China sets the yuan, saying that it should allow market forces to have a greater role in determining the exchange rate.

This appeared to be borne out on Wednesday, as other currencies declined against the US dollar, suggesting that rates are being driven more by a strong dollar than a weak yuan, as investors buy the greenback in anticipation of an early rise in US interest rates.

In a statement on Wednesday, the IMF said that the exact impact of the yuan devaluation would depend on how the new mechanism is implemented in practice. Greater exchange rate flexibility is important for China as the country strives to give market-forces a decisive role in the economy and as …