China making Yuan international currency? Dollar impacts?

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pinecarr's picture
pinecarr
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Posts: 2244
China making Yuan international currency? Dollar impacts?

Another contributor, pov56, posted this article under a different topic (the one about what's up with gold).  It didn't seem to get much attention there -understandably, as it was off topic.  But it seemed important to me, and so I'm starting it under its own topic.  Per pov56 :

"Could it be that China is making the Yuan an international currency?   This is VERY bad news for the dollar and indicates that they will lend us much less.

http://www.marketskeptics.com/2008/12/ch... "

Here are a couple other links I found that discuss this:

http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/398471/1/.html

http://www.investorsiraq.com/showthread.php?t=115340

 

hillbilly's picture
hillbilly
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Re: China making Yuan international currency? Dollar ...

Pinecarr,

perhaps pov56 posted it in the Gold string whilst alluding to Chinas rumoured potentially significant Bullion purchases in the future.

Maybe China are looking to back their Yuan with some sort of Gold standard in the future?

Justathought

Al.

pov56's picture
pov56
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Joined: Aug 26 2008
Posts: 14
Re: China making Yuan international currency? Dollar ...

Nope, I posted it thinking that China may be positioning the Yuan a more stable currency than the dollar.  Market Skeptics has another article on it.   If they are successful at encouraging other countries to use the Yuan then it hurts the dollar and helps gold.   

http://www.marketskeptics.com/2008/12/chinese-central-bank-us-dollar-is.html 

 

pinecarr's picture
pinecarr
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Posts: 2244
Re: China making Yuan international currency? Dollar ...

Wow, another really interesting  article pov56.  I agree with you; it sure looks like the Chinese are trying to position themselves for an unstable/falling  dollar.  This seems like big news to me!  I'm surprised how little attention this is getting in the western press.

pov56's picture
pov56
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Re: China making Yuan international currency? Dollar ...

 From the forex.org blog 
China's FX Reserves Fall
Anyone curious about whether China is intentionally allowing the RMB to depreciate, need look no further than the Central Bank's latest forex reserve figures, which registered a decline for the first time in nearly six years. At the same time, Chinese trade figures indicate that exports fell for the first time in seven years, which limits the government's ability to build up new reserves. As a result of the credit crisis, it's conceivable that the Central Bank will continue to spend down its reserves in order to provide a boost to its faltering economy. US President-elect Obama will have to deal with such forces if he wishes to successfully take on China's currency policy. Otherwise, the RMB currency could appreciate in 2009, bucking its trend over the last few years.

 

Perhaps there are some forex experts who would care to comment on these developments and their implications.  As a casual observer it doesn't sound good.  If China is going to drain its forex reserves does it mean they will stop buying our treasuries?

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2244
Re: China making Yuan international currency? Dollar ...

hyspec, I found a commentary on seekingalpha the other day that resonated with your idea, that there may be a relationship between China starting to move towards making the Yuan an international currency, and China making a large gold bullion purchase in the future.  The write-up mentions both 400 ton gold and 4000 ton gold as the size of the purchase, so I'm not sure which is right.   The comment is at: http://seekingalpha.com/user/325016/comments  It makes some pretty interesting speculations, such as how the gold puschase could be used as a strategy to hedge against dollar devaluation, and how the Chinese are going to be able to get rid of 100 billion+ US dollars in buying the gold.  I don't know how factual this commentary is, but it sure is interesting! 

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