Beijing floats the notion of a basket value-setter for the yuan

A good and hopeful sign announced in a WSJ story: 

China will consider publishing a so-called effective exchange rate for the yuan against a range of other currencies in an effort to de-emphasize its value against the dollar, a further indication of how Beijing plans to manage the yuan since effectively decoupling it from the U.S. currency.

Last bit seems a bit kind: China announced a decoupling and we go a nice little spike there right off the bat, but a bit pokey since.

Still, this is a good and smart and inevitably move by Beijing, and something I’ve been arguing for going back several years:  the need for an “asia” to join the euro in balancing the dollar. We all know the yuan will be its center of gravity, just like China will play Germany in an Asian Union, and so I chose—not too naively, I believe—to interpret this as a small step in that direction.

The basket of currencies is expected to be based on the host of major currencies of countries/union with whom China has the most trade.

Skeptics cite the vagueness of the description from the vice governor of the People’s Bank of China, and no doubt there will be zigging and zagging and nothing done with any great speed.  The point is just the floating of the concept for now.

A strict linking of the yuan to a basket of currencies is unlikely in the near term, analysts say, as it would mean the yuan could fall against the dollar when the greenback is rising against other currencies, which could enrage parties in the U.S. calling for yuan appreciation.

So, for now, experts describe the announcement as part of an “education campaign” designed to get parties both inside and outside China used to thinking about its inevitability.

Again, a good, smart move by China.