China continues to focus on Chinese Yuan entry in October

In a quinquennial meeting in October, the IMF will decide if Chinese Yuan (CNY) becomes a member of its Special Drawing Rights (SDR) basket. If this achieved it means China would join USD (which is now 41.9% of the SDR basket), EUR (at 37.4%), GBP (at 11.3%), and JPY (at 9.4%) within this hallowed club. 

Technically, the SDR is a relic of the 1945 Bretton Woods system and is merely a unit of account for the IMF. However, it does play a role in the international liquidity operations that the IMF undertakes, and so entering the basket would arguably cement China's claims to CNY attaining "reserve currency status".

It's not the intention here to speculate on whether CNY is ready for SDR entry or not, it's certainly an important enough part of the global economy due to China's vast export machine to be widely traded, which is the first criterion, but its fixity vs. USD, China's closed capital account, and even the recent clumsy intervention in the equity markets on the part of the Chinese authorities, weigh against the second freely usable criterion.

However, the issue is that China wants to achieve this SDR goal and it seems for that reason there has been no real movement in USD/CNY for months despite violent swings in data and equities. Indeed, the Chinese currency is again pegged vs. USD. 

In short, just a few months away from finding out if China is "in" or "out", and it looks unrealistic to expect any real exchange rate movement until then, says Rabo Bank.