China to add 11 currencies to CFETS RMB Index in 2017

According to China Foreign Exchange Trade System & National Interbank Funding Center, 11 new currencies will be added to the CFETS RMB Index on 01 January 2017. This is a regular adjustment that will increase the number of currencies in the index from 13 to 24.

From 1st January 2017, according to the sampling rule of “CNY versus FX currency pair listed on CFETS”, CFETS will add 11 currencies newly listed on CFETS in 2016. And the number of basket currencies will increase from 13 to 24. The newly increased basket currencies are South African Rand, Korean Won, the United Arab Emirates Dirham, Hungarian Forint, Polish Zloty, Danish Krone, Swedish Krona, Norwegian Krone,Turkish Lira and Mexican Peso. The sample currency weight is calculated by international trade weights with adjustments of re-export trade factors basing on the data in 2015. The sum of the weights for newly increased currencies is 21.09%. The new basket currencies cover those of the major trade partners of China, so as to strengthen the representativeness of the currency basket.

From DailyFx, this↓ is what before and after looks like for the CFETS RMB Index. According to reporting, there is at least one prominent addition in this round of adjustment – the addition of South Korean Won KRW which is China’s fifth largest trading partner. Direct trading between RMB and KRW started in June this year.

CFETS Yuan Basket constituents before and after, by DailyFX

CFETS Yuan Basket constituents before and after | Source: DailyFX

The CFETS RMB Index was first introduced on Friday 11 December 2015. The index is meant to be a guidance for market participants to look at the value of the Renminbi against a basket of currencies instead of focusing on the USDCNY exchange rate only.

In the BIS Triennial Central Bank Survey 2016, USDCNY is one of top six traded currency pairs. CNY market share moved to 8th spot compared to 9th in the 2013 survey.

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