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RBI to focus more on China's yuan than US dollar; here’s why

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The Reserve Bank of India (RBI) is shifting its focus to the Chinese Yuan also while deciding its intervention policy, rather than just the US dollar. The central bank wants to maintain India's export competitiveness among Asian peers as global investors adopt China Plus One strategy.

RBI to focus more on China's yuan than US dollar; here’s why
The Reserve Bank of India is likely to shift focus to the Chinese yuan, rather than the United States dollar alone as the central bank gears to tune economic support in line with recovery, according to a report.
The central bank's intervention policy will follow the yuan more than the dollar alone, sources told Economic Times. Central banks across the world use foreign exchange intervention as a monetary policy tool. This helps them influence the transfer rate of the national currency, rupee in this case. This allows stakeholders to be comfortable with transactions involving the rupee.
RBI is informally aiming at the benchmark level of 11.50 CNY-INR, according to the report. If the rate goes below this level, RBI will intervene and stabilise. At present, the yuan-rupee pair is at 11.65 against 11.72 a month ago. It had slipped to 11.46 on September 29. Meanwhile, the rupee-dollar value was nearly 74.55 Thursday.
Why is RBI considering yuan?
With supplies being hit by the COVID-19 pandemic, several global manufacturers are looking at other manufacturing destinations besides China.
As global investors adopt a China Plus One strategy, the RBI wants to make India's export more competitive among Asian peers. International investors deem the Indian rupee, Chinese yuan and Singaporean dollar as three relative stable currencies.
According to Bloomberg data, in the past one month, the rupee became the second-best performing currency in Asia after the Philippine peso. The rupee gained 0.68 percent against the dollar during the period, while the Chinese renminbi lost 0.04 percent and was ranked fifth in Asia.
Focus on exports
Exporters should aim to achieve $450-500 billion of outbound shipment in the next fiscal year, commerce and industry minister Piyush Goyal said last month.
This year in the April-September period, exports had touched $197 billion. The country is set to achieve the target of $400 billion this year, Goyal said.


 
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