China Eyeing Effective Exchange Rate

To further decouple its currency further from dollar, China plans to adjust the value of the yuan based on its effective exchange rate, reports the Wall Street Journal.


The effective exchange rate is an estimation of the value of a currency relative to a group of other currencies, weighted based on the amount of trade between the countries, explains the Journal.


The People's Bank of China previously hinted that it was moving to a new currency regime that would focus more on guiding the yuan against a group of currencies.


Quoting analysts, the Journal says the move is unlikely in the near term as it would mean the yuan could fall against the dollar, which could infuriate groups in the U.S. calling for the strengthening of the yuan.


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