Monday, January 15, 2018

Another major blow to dollar hegemony as Germany decides to add Chinese RMB to their reserves

As more news comes out of countries both selling U.S. treasuries, and declining to accept new ones, a major European economy has taken a huge step in aiding China to expand the internationalization of their RMB currency.  And this move will act as another straw on the camel's back for dollar hegemony.

Germany’s central bank has decided to add the Chinese currency to its foreign exchange reserves, according to Bundesbank board member Andreas Dombret. The move could further boost the international status of the yuan. 
Speaking at a finance forum on Monday, he said the decision was taken last year after the European Central Bank (ECB) switched €500 million ($611 million) worth of its US dollar reserves into yuan. The move reportedly reflects the increased use of the Chinese currency and Beijing’s importance as one of the eurozone’s biggest trading partners. 
“It is not a major amount but it is something that we decided on and that we want to be part of,” Dombret told Bloomberg. “The fact that the renminbi [yuan] is now included in the SDR (Special Drawing Rights) basket and the fact that the ECB has decided to do that are both factors we thought about.”Russia Today
This move could also be preparation for Germany to participate in China's yuan-denominated oil futures contract that is expected to be rolled out as early as this week.

Like with Pakistan last week, more and more countries are seeking bi-lateral trade agreements with China that do not necessitate the use of the dollar in global trade.  And by integrating Chinese Yuan into their central bank reserves, it sends a signal to the dollar that its days as the singular reserve currency are numbered.

0 comments:

Post a Comment