THE yuan declined the most since August in offshore trading Friday as China published a new index that values it against a broad range of currencies.

    The move by the China Foreign Exchange Trade System (CFETS) spurred speculation that policymakers want to reduce the yuan’s link to the U.S. dollar and let it weaken further.

    The offshore yuan fell 0.5 percent to 6.5317 per dollar in New York on Friday, the lowest level on a closing basis since April 2011.

    The CFETS, which is run by the central bank to facilitate interbank trading, published a new yuan index that is composed of 13 currencies, which will “help bring about a shift in how the public and the market observe the yuan exchange rate movements,” the organization said.

    A basket of currencies “can better capture the competitiveness of a country’s goods and services,” the central bank said.

    The dollar accounts for 26.4 percent of the basket, while the euro makes up 21.4 percent. The yen has a weighting of 14.7 percent.

    The announcement came after the People’s Bank of China allowed the decline of the yuan-dollar exchange rate to accelerate this month and the International Monetary Fund said it will add the currency to its reserve basket. The People’s Bank of China has reversed a policy where it had spent hundreds of billions of dollars to contain the drop stemming from its devaluation in August.

    Before the August move, the yuan had traded closely with the U.S. dollar, dragging the exchange rate up with an appreciating U.S. currency. By tying to the dollar, it also essentially linked China’s monetary policy to the U.S. Federal Reserve’s and limited the Chinese central bank’s flexibility to cut interest rates. (SD-Agencies)