LOS ANGELES -- A top Chinese central bank official suggested switching away from the U.S. dollar as a benchmark for the yuan's foreign-exchange rate, switching instead to a basket of currencies, according to remarks published Thursday.Good luck using the Euro in that basket. Perhaps you could add the ruble, the dinar (all of them) and whatever the hell Zimbabwe is using today.
In comments posted to the People's Bank of China Web site, the central bank's Deputy Gov. Hu Xiaolian said using a basket of currencies from the nation's top trading partners would allow the Chinese yuan to better
"Compared with pegging to a single currency, the exchange-rate regime with reference to a basket of currencies will help adjust exports and imports, current account, and balance of payment in a more effective manner," she said.
China's central bank currently sets a "central parity rate" against the U.S. dollar each day, with that day's trading range confined to 0.5% above or below that level.
But Hu said focusing on the dollar-yuan rate ignored China's bigger trade picture.
"A floating exchange rate has impact on total imports and exports of an economy," she said. "Therefore, the floating cannot be aimed to adjust [only the] bilateral trade balance, and it is not advisable to just look at the [dollar-yuan] exchange rate."
So they're worried about the dollar and can't afford to let the yuan slip down lest it imperil their domestic economy. Great, guys, there's always the Euro ...