RMB inclusion in SDR: near-term increase in capital inflows unlikely – Nomura

By FXStreet FXStreet (Bali) – Asia FX Strategist at Nomura note that despite the IMF staff proposal to include the Chinese Yuan – RMB – in its Special Drawing Rights (SDR) basket, a rapid near-term increase in capital inflows is unlikely in their view.

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IMF Managing Director Christine Lagarde issued a statement late Friday that the IMF staff had proposed that the Executive Board include RMB in its Special Drawing Rights (SDR) basket. She supported the findings and will chair a meeting of the Board to consider the issue on 30 November.

This suggests that Executive Board approval, should it be forthcoming, is likely to be unconditional. Separately, in a teleconference with China’s Vice-Premier Wang Yang, US Treasury Secretary Jack Lew said the US would support RMB inclusion if it meets the IMF’s existing criteria. With similar support previously expressed by various IMF members, it is now most likely that RMB will be included in the SDR basket, which was already the consensus view prior to the IMF’s Friday statement.

In this scenario, a rapid near-term increase in capital inflows is unlikely in our view, although gradual capital inflows should be the theme over the longer term, as global FX reserves …read more

Source:: FX Street