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Morocco reduces euro's weighting in its currency basket

The reduced weighting reflects the fall in trade with the euro zone.

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Morocco's central bank has reduced the euro's weighting in the currency basket used to set the dirham's exchange rate, to reflect a fall in trade with the euro zone, it said on Monday.

It is the first time in a decade that the bank has changed the basket's weighting, aiming to make its currency regime more flexible, as recommended by the International Monetary Fund.

The dirham is still mostly pegged to the euro but the single currency's weighting falls to 60 percent from 80 percent, while the dollar's weighting rises to 40 percent from 20 percent.

The North African country has seen an increase in trade with the United States, China and the rest of Africa as it sought new export markets in the wake of the euro zone debt crisis, which badly hurt the Moroccan economy.

"The new weighting has not an impact on the dirham's value," the central bank said in a statement.

It is the first step toward adopting more exchange rate flexibility to make its economy more competitive and better able to absorb shocks, it added.

The IMF, which gave Morocco a $5 billion credit line last year to help the country purse economic reforms, has urged Rabat
to make its currency regime more flexible.

As part of financial reforms, the government proposed in February a draft law that gives the central bank much more independence and prepares it for major financial reforms and a more flexible currency system.

Morocco is also set to allow the creation of Islamic banks and enable private firms to issue Islamic debt, after parliament approved and Islamic finance bill last November.