The match between the stock weightings and the currency basket is not perfect, but it is close enough.
The two most widely discussed options are to revalue or to shift to a currency basket (which Kuwait has already done).
Many economists expect China to shift to a currency basket next year.
One alternative is a currency basket reflecting the pattern of its trade.
Recently China and other countries have questioned that status, advocating greater use of other currencies or a currency basket like the IMF's Special Drawing Right (SDR).
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It may work for a while, too but eventually gold will migrate into a reserve currency basket and its price will advance many times from its current level.
Many economists in the region argue for a more flexible currency system, starting with a Kuwait-style currency basket, so interest rates can reflect the realities of a region with a very different economy from America's.
Even so, China could still introduce some flexibility into its exchange rate, and so regain control of monetary policy, by adopting a wider band or by pegging to a currency basket rather than just to the dollar.
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It would be unwise for China to float the yuan until it has cleaned up its banking system, but it could repeg against the dollar at a higher rate and shift to a currency basket, which is what the government has said it would like to do.
Now, officials at the Swiss National Bank are considering what currency or basket of currencies would replace the euro as its reference point for the currency ceiling, according to a person familiar with the situation.
Under a currency board arrangement, the central bank guarantees the redemption of all notes in circulation at a set exchange rate to the dollar or another foreign currency or basket of currencies.
In July, China revalued by 2% and pegged the currency to a basket of foreign currencies, rather than just the dollar.
This is also a compelling reason to oppose any plan to simply convert the national monopoly currency to a commodity basket standard.
Disruption, they say, could be minimised by converting all euro contracts to a modified form of the European Currency Unit, the basket of national currencies that preceded the euro.
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This would be a global currency explicitly backed by a basket of a dozen or so precious commodities, such as gold, silver, oil, etc.
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China made headlines on June 19 when it announced that it would release the yuan from its dollar peg and allow the currency to float against a basket of currencies instead.
The currency now floats to a limited extent against a basket of currencies.
Another alternative is a greater reliance on SDRs, the IMF's quasi-currency, which operates as a claim on a basket of currencies: the dollar, euro, sterling and yen.
Only then should it consider whether to allow itself more flexibility by, say, linking its exchange rate to a broader basket of currencies and thus abandoning the precious currency board.
Because China does not disclose the composition of the basket, setting the value of the yuan in this way provides its currency managers with a high degree of flexibility.
Among others, Benjamin Graham and Friedrich von Hayek advocated a basket of commodities, the latter within the context of a system of private currency.
Each Terra can be turned in for the specified share of the basket of commodities, which would be held as 100% backing of the currency, under contract with producers of those commodities who are partners in the financial institution issuing the Terras.
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So, if you are looking for the real driver of the market action, you can forget about the headlines for now and simply focus on the action in the dollar. (And for those currency-challenged sorts like me, the UUP provides a nice proxy for the action in the greenback versus a basket of currencies).
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