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All Eyes on Currency Changes

Mar 31 , 2011

Gradual internationalization of renminbi will benefit world's financial markets, but lessons of others should be heeded.

G20 seminar on reshaping the global monetary system is being held today in the eastern Chinese city of Nanjing. Given growing foreign pressure to appreciate the renminbi, China's forex policy and the renminbi's role in a multi-currency global system are likely be discussed at the meeting.

One week before the meeting, the USD/CNY fixed rate hit its highest point since 2005. Earlier on Jan 4, the World Bank issued its first renminbi-denominated bond. It will raise 500 million ($76 million) from the two-year bond issue with the nominal interest rate of 0.95 percent.

The bond aims to promote the use of the Chinese currency in international markets. The World Bank, as a renowned international financial institution, has supported the development of a Chinese currency market with this offering, as well as raised the significance of the renminbi for international investors. The issue has also enriched the variety of denominated bonds and provided more market liquidity.

Lu Chenxi a researcher with China Foreign Exchange Trade System.

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