China is adjusting the mix of foreign currencies used in setting the renminbi’s official daily value as part of efforts to stabilize its currency.
The move, which takes effect from Jan. 1, came as the rising dollar threatens to undermine its economy by accelerating the flow of capital out of the country, the Wall Street Journal reports.
The People’s Bank of China is cutting the US dollar’s role in the yuan’s daily reference rate and adding other currencies into the mix, including the Korean won, Saudi riyal and Swedish krona, the newspaper said.
By doing so, the Chinese central bank is giving itself more room to maneuver to keep the renminbi from falling too fast, the Journal quoted analysts as saying.
In recent weeks, the Chinese currency has felt downward pressure amid uncertainty over the country’s economic conference and the surging greenback.
The potential for faster interest rate increases in the United States could add more pressure on the renminbi.
So far this year it has dropped 7 percent against the dollar, nearly double the decline from the year before.
Analysts say the currency could break the psychologically important seven-yuan-per-dollar level as soon as next month, the report said.
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