China is set to allow its currency to be traded against at wider basket of currencies in the onshore forex market.

This was announced by the central bank in a report on Friday.

The People's Bank of China (PBOC) did not name any of the new currency pairs that will be launched for trading.

The yuan is presently tradeable against seven major currencies - the US dollar, the euro, the yen, the Hong Kong dollar, the British pound, the Malaysian ringgit and the Russian rouble.

How the central bank will decide which currencies are next depends on bilateral trade relations with other trading partners as it pushes a larger role for the yuan in settling international trade.

However, experts in Hong Kong are not expecting an immediate market impact - the last time the PBOC announced a tie-up with the ringgit, it did not move the Malaysian currency very much.

But the effect of increasing the number of currencies traded against the yuan will gradually reduce the US dollar's weighting in the currency basket.

The market estimates that the greenback now account for up to 70 percent of China's nominal effective exchange rate.

Earlier this week, a state-run think tank wrote a commentary, calling for China to de-peg the yuan from the US dollar in the basket of currencies.

And it argued for the basket be determined by their share in China's trade.

In another step to internationalise its currency, a yuan offshore market is also currently being developed in Hong Kong, with a growing bond market and by the end of this month, yuan-denominated stocks will be on offer as well.

The Chinese central bank also noted that the demand for yuan assets was on the rise in overseas markets as Beijing expands the use of the currency for trade and even investment purposes.

channelnewsasia.com