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New exchange rate index could trigger weaker yuan

In a further attempt to unhinge the Chinese yuan from the dollar, the People's Bank of China announced recently that it will publish a new trade-weighted exchange rate index daily on its China Foreign Exchange Trade System website.

     The Chinese central bank said the index will be used as a reference, rather than as a specific target for managing the value of the yuan, but it is clear that it is designed to allow the bank greater flexibility in guiding the value of the currency, and to accommodate a further depreciation of the yuan against the dollar, which remains China's most important trading currency.

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