China to cut weighting of dollar, euro in CFETS yuan basket index in 2023


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SHANGHAI — China will adjust the weightings of a key yuan index basket in 2023, the country’s foreign exchange trading platform said on Friday, in a move to ensure the currency’s value is in line with trade situations.

Starting on Jan. 1, the China Foreign Exchange Trade System (CFETS), which is overseen by the central bank, will lower the dollar’s weighting in the CFETS currency basket to 19.83% from 19.88% and cut the euro’s weighting to 18.21% from 18.45%, according to an online statement.

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Such adjustments are unlikely to create volatility in yuan trades, but it may affect the setting of the yuan’s official daily midpoint fixing, which caps the spot trade in a narrow range of 2% around that level.

The CFETS index finished the year at 98.67, down 3.71% from a year earlier, according to Reuters calculation based on official data. During the same period, the onshore yuan lost about 8.6% to the dollar and looked set for the biggest annual drop since 1994.

China has adjusted the CFETS basket multiple times since it introduced the trade-weighted yuan index in December 2015 to better reflect external trade conditions.

The trading platform also said it would keep the weighting of a yuan index based on the BIS currency basket unchanged, while lifted dollar’s weighting in another index based on the SDR basket. (Reporting by Beijing Newsroom; Editing by Andrew Heavens and Alex Richardson)


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