The renminbi's status as a global reserve currency may be effectively guaranteed following formal backing by International Monetary Fund (IMF) staff, according to economists, but traders have yet to be convinced.
The yuan fell to an intra-day low of 6.379 per dollar on Monday, weaker than the central bank's midpoint rate of 6.375 and the previous session's closing quote of 6.374, as Friday's news failed to spark buying, surprising several analysts who expected short-term bullishness.
Last week, IMF staff members issued a paper to the Executive Board stating that the renminbi, also known as the yuan, met requirements to be a "freely usable" currency, proposing it should be included in the organization's Special Drawing Rights (SDR) basket as a fifth currency, alongside the U.S. dollar, euro, British pound and Japanese yen.
Chinese authorities have addressed all remaining operational issues identified in an initial analysis in July, said IMF director Christine Lagarde in a statement. The organization's final decision on the issue is expected on November 30.
Friday's positive remarks makes yuan inclusion more than an 80 percent likely, according to United Overseas Bank. Other banks issued equally bullish remarks, with TD Securities calling SDR acceptance "a done deal."
So, why aren't markets cheering?
Friday's news is an undeniable positive for the world's second-largest economy, but it may not be enough to trigger buying just yet.
"While SDR inclusion is an important milestone, it is not the end-game for the internationalization of the RMB. In the foreseeable future, China will have to continue to convince foreign institutions and individuals of the benefits of holding RMB denominated assets," Louis Kuijs, head of Asia economics, at the Royal Bank of Scotland (RBS), wrote in a report