Market volatility alone not reason for concern over yuan: IMF

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Updated: September 4, 2015 1:20:34 PM

The International Monetary Fund (IMF) does not see China's recent market volatility by itself as a reason to voice concern about including the yuan in its benchmark currency basket, an IMF spokesman said on Thursday.

The International Monetary Fund (IMF) does not see China’s recent market volatility by itself as a reason to voice concern about including the yuan in its benchmark currency basket, an IMF spokesman said on Thursday.

IMF deputy spokesman William Murray said the fund was on track to complete a review of its Special Drawing Rights basket by the end of the year. Beijing has pushed hard for the yuan to be included.

“Some of the recent volatility that we have seen in markets has been … some market reaction to the move to adopt a more flexible exchange rate in China,” he said. “But that in itself is no reason for us to be voicing concern about China and the SDR basket.”

In a note prepared for a meeting of Group of 20 financial officials, IMF staff said an economic slowdown in China and market volatility were among rising downside risks to growth and that central banks in advanced economies should keep interest rates accommodative.

The U.S. Federal Reserve has flexibility to hold off on raising interest rates, Murray said, but declined to comment on whether a hike would be appropriate when the U.S. central bank holds its next policy-setting meeting later this month.

“Our general view is that they have flexibility to hold off,” he said.

Following the G20 meetings in Ankara, IMF Managing Director Christine Lagarde will visit Kiev on Sept. 6 to meet with local lawmakers and officials. Ukraine last week reached a deal with creditors to ease debt repayments, meeting some of the conditions for a $17.5 billion IMF bailout.

But the deal must still be approved by Ukraine’s parliament and no legislation has yet been submitted to lawmakers. Nomura analyst Tim Ash said Lagarde’s visit suggested nervousness about the level of support in the parliament.

Ukraine bond prices rose to nine-month highs on Thursday, with the benchmark 2017, 2020 and 2023 bonds climbing between four-tenths of a cent and 1.5 cents to all be just shy of 75 cents in the dollar, the first time they have hit such levels since December.

Murray said the IMF looked forward to seeing Ukraine’s debt restructuring deal finalized “fairly soon.”

An IMF mission will visit the country on Sept. 22, he said.

Murray added that the IMF still wanted to see “substantial” debt relief for Greece before deciding whether to take part in another support program, and was awaiting the outcome of that country’s Sept. 20 election.

“We still remain engaged with the interim government at the technical level and we’re going to work with the new government … as soon as that new government is ready to re-engage with us on policies,” he said.

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