China\u2019s central bank has said it no longer sees any benefit in increasing its $3.66 trillion foreign currency reserves \u2013 already the world’s largest. China will cap its purchases of US dollars in an effort to limit the depreciation of the yuan.<\/p>\n
\u201cIt\u2019s no longer in China\u2019s favor to accumulate foreign-exchange reserves,\u201d<\/em> Bloomberg quoted Yi Gang, a deputy governor at the central bank as saying Tuesday.<\/p>\n Decreasing the influence of the dollar and other currencies is a step closer to reaching China\u2019s 2015 goal to \u201cfloat\u201d its currency and according to the People\u2019s Bank of China will help the everyday Chinese citizen.<\/p>\n Between July and September 2013 China\u2019s increased its foreign \u2013 currency holdings by $166 billion, boosting it to the world\u2019s highest of $3.66 trillion. This is also more that the Gross domestic product of Germany \u2013 the Europe\u2019s biggest economy, Bloomberg reports.<\/p>\n This will \u201cbasically\u201d<\/em> end the interference of foreign currency in the Chinese market, and widen the yuan\u2019s daily trading range.<\/p>\n The move also provides a buffer to China from future US Federal Reserve stimulus tapering, which, even just as it looms, has had severe ripple effects on emerging market currencies in Brazil and India<\/a>.<\/p>\n Tuesday minutes from the Fed’s policy meeting said it could start tapering its monthly $85 billion bonds purchases in the “coming months”<\/em>, if the job market improves further. Fed members also weighed the possibility of slowing the purchases even without clear evidence of a strengthening job market. The news sent Asian stocks lower on Thursday, Japan an exception.<\/p>\n Hong Kong’s Hang Seng shed 0.7 percent to 23,539.83 and China’s Shanghai Composite decreased 1.1 percent to 2,183.50.<\/p>\n Once the yuan is set to free float, international transactions will be carried out in the Chinese currency, and it will become common in global trade, in league with the euro and dollar.<\/p>\n The Chinese yuan currently is the 13th most-used currency in the world for international payments.<\/p>\n The yuan has been dubbed a \u201chermit currency\u201d, isolating itself from foreign investment and setting its own rules, but is now slowly entering world currency markets.<\/p>\n