[BEIJING] The International Monetary Fund welcomed China's move to devalue the yuan and said it doesn't directly impact the country's push to win reserve currency status.
The comments by the IMF came as China cut the value of the yuan for a second day after surprising markets on Tuesday when it lowered the yuan's value by the most in two decades. The central bank said the move would allow the market to play a greater hand in setting the currency's value. Economists said the decision was also likely taken to boost exports.
The People's Bank of China on Wednesday set the yuan's reference rate at 6.3306 per dollar, 1.6 per cent lower than Tuesday's level.
"The new mechanism for determining the central parity of the Renminbi announced by the PBC appears a welcome step as it should allow market forces to have a greater role in determining the exchange rate," the IMF said in a release. "The exact impact will depend on how the new mechanism is implemented in practice." On China's push for the yuan to be included in the IMF's basket of reserve currencies, known as the Special Drawing Rights or SDR, the Washington-based fund said the devaluation won't directly impact its decision.
"Regarding the ongoing review of the IMF's SDR basket, the announced change has no direct implications for the criteria used in determining the composition of the basket," the IMF said. "Nevertheless, a more market-determined exchange rate would facilitate SDR operations in case the Renminbi were included in the currency basket going forward."