Weekend Economists Host a Moveable Feast October 10-12, 2014

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34. ECB Weighing First Step to Buying Yuan for Foreign Reserves

http://www.bloomberg.com/news/2014-10-10/ecb-weighing-first-step-to-buying-yuan-for-foreign-reserves.html

The European Central Bank will discuss next week whether to begin laying the groundwork to add the Chinese yuan to its foreign-currency reserves, according to two people with knowledge of the matter.

Governing Council members gathering in Frankfurt for their Oct. 15 mid-month meeting will consider the move, said the people, who asked not to be named because the discussions aren’t public. Should officials eventually decide to buy the currency, initial purchases would be small and might start in a year at the earliest, one of them said.

Such a measure by the ECB would mark a major step in the internationalization of China’s currency, also known as the renminbi. While China is the world’s second-largest national economy, the yuan isn’t ranked among the most-held foreign reserve assets, according to data from the International Monetary Fund. The U.S. dollar leads at 61 percent of holdings.

The agenda of the Governing Council is confidential, an ECB spokesman said, declining to comment further on the matter.