Turbulence in Chinese financial markets, reflecting growing worries about investing in the country's assets, could slow the 's rapid emergence as a major international currency.
Over the past five years, the yuan has gone from being a thinly traded currency to a major one for trade settlement, retail and institutional investment and arbitrage activity. A host of financial and commodity linked derivatives are tied to it.
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Analysts said two changes this year in Chinese policy have highlighted risks that could slow down the yuan's march towards internationalization: the widening of the yuan's daily trading band and a toughening of Beijing's attitude towards defaults.
The People's Bank of China (PBOC), the central bank, this month doubled the daily permitted trading band for the yuan to 2 percent from 1 percent either side of a reference rate. It also pushed the currency lower in a bid to shake hot money out of the market to make clear the yuan is no longer a one-way upward bet.