Friday, September 29, 2017

Internationalization of the Yuan continues forward as SWIFT begins displaying CIPS data on their platform

Ever since 1973 when Henry Kissinger forged the Petrodollar agreement with Saudi Arabia, the U.S. has had a monopoly on global payments through the dollar being recognized as the world's reserve currency.  But over the past decade, America's dominance has slowly waned as more and more currencies have gained market share in the realm of global settlement.

One of these currencies of course is the Chinese RMB (Yuan).  And as the Far Eastern economy has worked hard towards internationalizing their currency over the past five years, it appears that even the U.S. is recognizing the currency's growing influence as on Sept. 27, the SWIFT payment system began to show CIPS data for the first time on their platform.

The Renminbi held its spot as the world's fifth most active payments currency in August, according to SWIFT's RMB tracker.  The news came just one day after SWIFT said it will start displaying China's Cross Border Interbank Payment System's (CIPS) data on its system. - Global Capital
Since the rise of the BRICS coalition, and the fact that China is now the largest financial center in the world along with being the world's second largest economy, it is surprising that SWIFT took this long to begin tracking the RMB as a primary currency used in global payments.  And the use of the Yuan is in this capacity is only expected to increase as they continue forging new bi-lateral trade agreements, and through their planned creation of a Yuan denominated oil contract.

Ever since the 2008 financial crisis questions have arisen within the entire financial system on just how long the dollar could survive as the singular reserve currency, especially as their economy has been in decline for nearly two decades.  And with China's own economy rising at leaps and bounds since the late 1990's, and with the aid of Russia accepting the RMB as a viable currency in their own energy markets, it may not be too long into the future before the pendulum shifts to the other side where bankers will be tracking the dollar's trajectory over on the CIPS platform rather than on the SWIFT system.

2 comments:

"their economy has been in decline for nearly two decades."

Uh... what?

You do understand the yuan is pegged to the dollar, right?

Sigh.

Their as in US economy... the subject in the paragraph was America.

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