Yuan climbs to one-week high as reserve bid gets US impetus

[BEIJING] The yuan climbed to a one-week high as President Xi Jinping's quest to get the yuan recognized as a global reserve currency received fresh impetus from the US.

The US supports the inclusion of the yuan in the International Monetary Fund's Special Drawing Rights provided it meets the lender's existing criteria, a statement from the two countries showed after Mr Xi and US President Barack Obama met in Washington Friday. China plans to open its interbank market to US investors via an exchange-rate cooperation between the China Foreign Exchange Trade System and the CME Group, the Xinhua News Agency reported Friday.

"It's very positive progress for China to see the US take a step toward supporting its reserve currency push," said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. "CFETS and CME's cooperation is a milestone for yuan's internationalization as it aims to attract more investors." The onshore yuan, which is allowed to diverge a maximum two per cent from a daily fixing set by the People's Bank of China, rose 0.08 per cent to 6.3691 a dollar as of 11:03 am in Shanghai, China Foreign Exchange Trade System prices show. It advanced to 6.3685 earlier, the strongest level since Sept 21. The PBOC raised the currency's reference rate by 0.09 percent, the most since Sept 18, to 6.3729. The yuan in Hong Kong, where it trades freely, climbed 0.07 per cent to 6.3933 a dollar, according to data compiled by Bloomberg.

China continues to reform its exchange rate and there's no reason for the yuan's devaluation in the long run, Mr Xi said during a news conference at the White House with Mr Obama on Friday.

The Obama administration had previously insisted that China implement financial reforms that would lead to the yuan's inclusion in the SDR basket. Friday's shift brings the US closer to the positions of the UK and France, who have favored the yuan being granted reserve status.

BLOOMBERG