This is in line with a number of moves fuelled by both the expansion the Chinese economy and the overall shift by China government towards internationalising the RMB. The Chinese currency is not fully convertible under the current capital restrictions but Chinese leadership have made efforts to raise the international status of its currency over the past couple of years.
Late last year HSBC released a report titled, he rise of the redback, which summarised the process of RMB internationalisation into three general steps. The first is to make the RMB a global trade settlement currency; the second an international investment/debt currency; and the third an international reserve currency. According to the report the process is roughly between stage one and two. Stage three, however remains allusive, as it will be a long process for the renminbi achieves the reserve currency credentials.
Traders commented the pricing of the RMB for the most part reflected the value of the RMB against the U.S. dollar and the dollar's value versus the Australian and Canadian dollars, Reuters reported. In the same news piece, forex dealers also mentioned that it would take time for the yuan, which has been connected so closely to the U.S. dollar, to trade more autonomously against the two latest currency pairs.
The floating regulations on the RMB are as follows; it can rise or fall 3 percent versus the two currencies from the Peoples Bank of China mid-points each day, according to an exchange announcement last Thursday, cited in the Reuters report. Also, the RMB can move just 0.5 percent against the dollar in either direction from the currency peg per day. The yuan was trading at 6.2256 to the Canadian dollar and 6.3615 the Australian dollar in late trade on Thursday December 1, weakening slightly from its opening price earlier in the week.
The two foreign currencies are among seven other currencies that are permitted to be traded on China's interbank foreign exchange market; the U.S. dollar, Hong Kong dollar, Japanese yen, euro, British pound, Malaysian ringgit and Russian ruble. These two new currency pairs come after the China Foreign Exchange Trade System began yuan trading versus the rouble in November 2010.
