Chinese Yuan To Replace US Dollar As World Reserve Currency

IMF is giving strong signals that Chinese Yuan will be included in the basket of reserve currencies. Just a few days back Chinese Central Bank had made the rate cut. This sent shivers through the global financial markets. So you should start watching what the Chinese Central Bank is going to do just as you watch what the Federal Reserve is going to do. Right now FED is not making the rate hike. Most probably FED will not make the rate hike this year. So start watching the Chinese Central Bank also. Soon Yuan CNY will be a free floating currency and you can trade it just like you trade the EURO, GBP, USD, AUD, NZD etc.

China’s currency may become a global reserve currency this year. The International Monetary Fund hinted that the promotion could happen when it said this week that it does not consider the yuan undervalued. The final decision will be taken at an IMF meeting in October.

Now what does this mean if Yuan becomes reserve currency. At least $1 trillion of global reserves will migrate to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.

Foreign companies’ issuance of yuan-denominated securities in China, known as panda bonds, could exceed $50 billion in the next five years, according to the World Bank’s International Finance Corp.

Chinese Central Bank has devalued Yuan 2 times in the past few months. The Chinese stock market crash wiped out $1 trillion. Global financial markets became highly nervous. This can happen again.

China’s quest to get the yuan recognized as a reserve currency by the International Monetary Fund (IMF) could trickle down to affect gold, says Jim Rickards, best-selling author of ‘Currency Wars’ and ‘The Death of Money’. Rickards explains that there is a current peg between the U.S. dollar and the Chinese yuan, ‘the currency wars are being fought around the world, but there is a sort of a lull in the fighting between the U.S. and China right now.’

I was looking at the Gold XAUUSD H1 chart when it fell like a stone. What happened? I thought. There was nothing the FED was doing or the ECB was doing. Then I look at the economic news and I got the answer. Chinese Central Bank had just cut the rate.

0 Comments