Yuan Flunks Fed Haven Test as IMF Prepares It for Reserve Basket

Just two months before it is to be included in the International Monetary Fund’s influential basket of global reserve currencies, a new report distributed by the Federal Reserve is casting doubt on the ability of China’s yuan to achieve haven status for investors.

While the yuan performed better than some of its major peers from 2011 through late 2015, its relative value has fallen since then against the traditional haven currencies as market volatility increased, according to a study published last week. The report tested the relationship between a gauge of stock-market price swings and the value of the yuan against the U.S. dollar, yen, euro, the British pound and the Swiss franc, currencies perceived as safe exchange rates because their value rises relative to others during uncertainty.