Yuan’s INTERNATIONALIZATION – What will it bring?”

YUAN’S INTERNATIONALIZATION – WHAT WILL IT BRING?(Source blacklistednews.com) All of us who have even the smallest relation to the field of finance and economics have probably heard that China’s yuan has recently been included into the International Monetary Fund’s basket of reserve currencies. For those who are out of the picture: the yuan has joined the U.S. dollar, the euro, the yen and British pound in the IMF’s special drawing rights (SDR) basket, which makes it one more currency that countries can receive as a part of IMF loans. An interesting fact – the IMF added the yuan on the day of the anniversary of the founding of the People’s Republic of China, which probably makes the 1st of October even more significant to the people and history of this country than it was before. This event, naturally, prompts a burning question – can it be the beginning of changes in the world power configuration? After all, this may mark the new era for the yuan, which now has the potential to reduce the global dominance of the U.S. dollar. All of this, supposedly, may one day turn China into a key player in the global financial system. No one can give an accurate prediction, of course. At the same time, predictions really matter, particularly if to talk about private investments, Forex, high frequency trading and even prices for gold. Of course, a good prediction must always be based on firm facts. The facts, in turn, are the following. First of all, the yuan’s new status is highly likely to increase its trading volume. After all, being granted with this status means that the currency is legitimized and recognized as safe and stable. Secondly, this currency is likely to play an especially important role as far as payments and settlements are concerned. As recently reported, the yuan has overtaken six currencies over the past three years, which actually says a lot. Thirdly, the yuan will be more often used to price international contracts. At the moment, as it is known, the commodities China exports are generally priced in the U.S. dollars. Were they priced in the yuan, the dollar’s value would become of less importance to the Chinese.

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