PRAGUE: The Czech National Bank (CNB) has made changes allowing it to start using China's yuan as a reserve currency in the future, giving it a further investment outlet for its increased foreign exchange holdings, it said on Thursday.
The bank has not yet invested into the yuan, it said in an emailed statement, but has taken decisions allowing it to make future investments. Those changes were first reported by daily Hospodarske Noviny.
The changes come after the International Monetary Fund added the Chinese renminbi (RMB) to the basket of currencies making up the Special Drawing Right in 2016.
"Currently the CNB is not investing into the Chinese currency," the statement said, adding it has been monitoring the Chinese market.
"On the basis of this monitoring, it can be said the RMB is an investment opportunity rather than a reserve currency at present," it added.
"Therefore any potential investment into RMB in an initial phase would be about an opportunity and gaining know-how in the Chinese market, both with the view of further diversifying the CNB's foreign exchange reserves."
The majority of Czech reserves are in euros and 23 percent of it is in dollars. The reserves stood at 127.34 billion euros in March.
The central bank has been selling euros for dollars since 2017 to rebalance reserves after a big jump in euro holdings between 2013 and 2017 when the bank intervened on markets to keep the Czech crown weak, a measure introduced to fight deflation risks.
The bank has also said it would need to decide at some point whether to restart a past programme of selling yields on foreign currency holdings. The programme was interrupted after the launch of its intervention regime.
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