What does putting the yuan in the basket mean? \u00a0 Very little except a recognition of the importance of China’s economy on the world scene.<\/p>\n
Most things are not priced in SDRs, the Special Drawing Rights basket of currencies used by the International Monetary Fund as its units of account.<\/p>\n
Yet because its been put in the basket, there is an expectation that China will let the market decies the yuan’s exchange rate. \u00a0If China maintains a rate that is in fact pegged to the dollar, it will boost the dollar’s weight in the basket, which is not the point of the inclusion.<\/p>\n
The Federal Reserve has begun to raise interest rates, which will put pressure on the yuan in any case. \u00a0It’s unlikely that China will give the market free rein, but China has to be aware of its new responsibilities as part of the SDR.<\/p>\n
What does putting the yuan in the basket mean? \u00a0 Very little except a recognition of the importance of China’s economy on the world scene. Most things are not priced in SDRs, the Special Drawing Rights basket of currencies used … Continue reading ![\"Pressure](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/08\/China-Devalues-Yuan-300x259.jpg\")
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