China will adjust the weights of two key yuan index baskets in 2024, the country’s foreign exchange trading platform said on Friday to better reflect trading patterns.
From January 1, the China Foreign Exchange Trade System (CFETS), overseen by the central bank, will reduce the weight of the US dollar in the CFETS currency basket to 19.46% from 19.83% and reduce the weight of the euro to 18.08% from 18.21%, according to an online statement.
The adjustments will “further strengthen the representativeness of the yuan currency basket index,” CFETS said in a statement.
China has reduced the weights of the dollar and the euro in the CFETS basket in 2023.
Such adjustments are unlikely to create sharp volatility in yuan trades, but may affect the setting of the yuan’s official daily midpoint, which limits spot trade to a narrow 2% range around that level, market watchers said.
The CFETS ended the year at 97.42, down 1.27% this year, according to iFreshBrief’s calculation based on official data. The dollar has lost 2.7% against the dollar over the same period and looks set for a second straight annual decline.
Since the introduction of the trade-weighted yuan index in December 2015, China has adjusted the CFETS basket several times to better reflect foreign trade conditions.
In addition, CFETS said it will also adjust the BIS RMB basket index after the Bank for International Settlements (BIS) adjusted currency weights earlier this year.
In detail, CFETS will remove the Croatian kuna and add the Bosnian mark, Moroccan dirham, North Macedonian denar, and Serbian dinar to the basket.
