China Reveals Details of Yuan Revaluation

China disclosed for the first time Wednesday the composition of the basket of currencies used to set the yuan’s value, saying it mainly included the dollar, euro, yen and Korean won.

The currencies of Singapore, Britain, Malaysia, Russia, Australia, Canada and Thailand also are considered in setting the yuan’s foreign exchange rate, said Zhou Xiaochuan, the central bank governor.

The news dispels at least some of the mystery surrounding the yuan’s new exchange rate, although there was no information about the weightings of each currency.

When China cut its currency’s decade-long peg to the dollar July 21 and allowed it to move in a restricted float, it said the yuan’s exchange rate would be determined by a collection of unspecified currencies.

At that time, the central bank said only that it had raised the yuan’s value by about 2% to 8.11 yuan to the dollar from the previous rate of 8.27, and that the yuan would be allowed to move 0.3% in either direction each day.

Since then, the yuan has appreciated slightly on Shanghai’s restricted foreign exchange market, closing at 8.1062 yuan to the dollar Wednesday.

China’s central bank also said Wednesday that it would tighten oversight of the country’s foreign exchange markets while moving to liberalize its currency trading regime.

The statement came a day after it announced that Beijing was expanding the country’s foreign-exchange forwards business and launching currency swaps -- moves that, as expected, had little immediate effect on the local market.

(Forwards are contracts in which a buyer and seller agree on delivery of a specified currency at a specified future date. A currency swap involves the exchange of principal and interest in one currency for the same in another currency.)

On Wednesday, the bank said it also was allowing non-banking firms to trade in its onshore foreign exchange market and was launching foreign-exchange forwards on the domestic interbank market.

While widening currency trading onshore, the bank said it would strengthen its oversight and management of the market “to guarantee stable, orderly market operations and maintain the basic stability of the yuan exchange rate at a reasonable, balanced level.”

The central bank said the new rules allowing broader use of foreign exchange derivatives were aimed at meeting the need to hedge foreign exchange risk after the July 21 revaluation.