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Bank Negara Welcomes IMF Decision On Chinese Currency

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KUALA LUMPUR: Bank Negara governor Tan Sri Zeti Akhtar Aziz welcomes the inclusion of the Chinese currency in the International Monetary Fund’s (IMF) basket of reserve currencies as an “important development” that will contribute to greater stability in the international monetary system.

But the central bank is in no rush to increase its holdings of yuan reserves.

“We will assess that carefully before making such decisions,” she said on the sideline of the Iclif Leadership Energy Summit Asia 2015 here yesterday.

Zeti said the central bank was currently comfortable with its yuan holdings level.

“Of course the US dollar will remain the dominant reserve currency but having other currencies like the euro, yen, pound sterling and now the yuan; that is an important development,” she said.

On Monday, the IMF decided to add the yuan to the Special Drawing Rights basket along with the US dollar, euro, pound sterling and yen beginning October 2016.

Asean countries and countries that have significant trade with China will use yuan as a trade currency because there is tremendous benefit in doing so.

“This is because these countries will not be exposed to the volatility of the third currency,” Zeti said.

Analysts said news of inclusion of the yuan in IMF’s global reserved basket would not have immediate impact on the regional currency.

Malayan Banking Bhd head of foreign exchange research Saktiandi Supaat said the take-up in yuan assets would be gradual.

“The move would support the yuan in the long term,” he told StarBiz.

The currency market, he said, continued to be fixated with developments in the US.

“The focus would still be on the monetary reviews in the US middle of this month,” Saktiandi said.

Yesterday, the ringgit strengthened 0.6% to RM4.239 against the US dollar ahead of a bond sale by the Government. The Government is expected to sell RM4bil bonds with 5-year tenure on Dec 3, according to Bloomberg.

In his report yesterday, Saktiandi said he saw limited weakness in the ringgit on the back of stable crude oil prices compared to previous rapid decline as well as slowly dissipating concerns of domestic issues.

“We reiterate that the ringgit’s weakness is temporary and is not a reflection of underlying fundamentals (which remain intact),” Saktiandi said.

Meanwhile, independent forex strategist Dr Suresh Ramanathan said the ringgit was still facing a liquidity issue and would remain weak in the near term.

“The ringgit is likely to trade between 4.25 and 4.50 against the US dollar until year-end,” he told StarBiz.

He said credit tightening by the Federal Reserves was unlikely to happen in December.

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