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Investors tip yuan to be major reserve currency
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More than half of domestic and foreign institutional investors believe that the Chinese yuan will eventually become a major reserve currency despite its recent depreciation, State Street, the world’s second-largest custodian bank, has found in a survey.
The survey covered 100 domestic institutional investors based in China’s mainland and 100 foreign institutions.
It found that 53 percent of all respondents are confident the yuan will one day surpass the US dollar as the top currency in international holdings of foreign-exchange reserves.
With regards the timetable, 58 domestic and 71 foreign respondents said full financial liberalization in China will happen within 10 years, but one in every five Chinese institutions said it will never happen.
The survey results came as the yuan weakened by 0.46 percent against the US dollar to 6.1266 yesterday, the largest daily drop in three years. The yuan has depreciated for six straight days.
“We noticed that institutional investors have begun to sell the yuan in the near term but data showed they are neutral about the yuan’s exchange rate,” Jeremy Armitage, Asia-Pacific head of State Street’s sales, trading, and research, said yesterday.
The government may be preparing to further liberalize the yuan’s trading band by allowing greater volatility of the currency, Armitage added.
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