The renminbi rose after Germany’s central bank said it would include the currency in its reserves, a move seen as boosting the internationalisation of China’s currency.
Andreas Dombret, a member of Deutsche Bundesbank’s executive board, said at the Asian Financial Forum in Hong Kong that the central bank had “decided to include the RMB in our currency reserves”.
He said: “The RMB is used increasingly as part of central banks’ foreign exchange reserves; for example, the European Central Bank included the RMB [as a reserve currency].”
The move comes after the renminbi became the fifth currency in 2016 to join the International Monetary Fund’s Special Drawing Right (SDR) basket, which is a collection of reserve currencies that serve as an alternative to the US dollar.
The Bundesbank’s six-member board took the decision to invest in renminbi assets in mid-2017, but it was not publicly announced at the time. No investments have been made yet; preparations for purchases are continuing.
The inclusion in the German central bank’s reserves basket underscored China’s increasing prominence in the global financial landscape, and reflected policies aimed at making the currency more freely tradable internationally.
The ECB began to buy renminbi assets last year, announcing in June that it had made €500m worth of investments in the Chinese currency.
Mr Dombret said: “The notable development from the European point of view over the past few years has been the growing international role of the RMB in global financial markets.”
Joachim Wuermeling, the Bundesbank’s board member responsible for its €167bn reserves stockpile, said: “The decision to accept the yuan is part of a long-term diversification strategy and reflects the increased role of the Chinese currency in the global financial system. In addition to the dollar and the yen, we have been investing in Australian dollars since 2013 and are looking to invest in other currencies.”
Last week, the People’s Bank of China decided to drop a mechanism it recently created to support the renminbi and safeguard it against capital flight, in a sign of rising confidence in the currency. Mr Dombret said the move was “something which we welcome very much”.
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