THE move by China’s central bank Tuesday to change the mechanism for setting the daily reference rate for the yuan “appears a welcome step” as it should allow market forces to have a greater role in determining the exchange rate, the International Monetary Fund (IMF) said yesterday.

    “Greater exchange rate flexibility is important for China as it strives to give market forces a decisive role in the economy and is rapidly integrating into global financial markets. We believe that China can, and should, aim to achieve an effectively floating exchange rate system within two to three years,” an IMF spokesperson said in a statement.

    On China’s push for the yuan to be included in the IMF’s basket of reserve currencies, known as the Special Drawing Rights, or SDR, the Washington-based fund said the devaluation won’t directly impact its decision.

    “Regarding the ongoing review of the IMF’s SDR basket, the announced change has no direct implications for the criteria used in determining the composition of the basket,” the IMF said.

    “Nevertheless, a more market-determined exchange rate would facilitate SDR operations in case the yuan was included in the currency basket going forward,” it said.

    (SD-Agencies)