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- Could the Chinese yuan dislodge the US dollar as a reserve currency? – Natixis
Could the Chinese yuan dislodge the US dollar as a reserve currency? – Natixis
FXStreet reports that Natixis said that given the large share of US debt in the hands of foreign investors, the risk of a sell-off has direct implications on the dollar reserve currency status.
“The dollar remains the world’s largest reserve currency, but it is facing both domestic and external risks. The domestic risk is really about the need to finance a huge debt fed by monetary and fiscal stimuli, particularly after COVID-19. The jury is still out as to whether the U.S. will remain productive enough, and thus grow enough, to repay the debt.”
“On the external front, it is really all about China and its quest to elevate the RMB to the podium of reserve currencies but also to bypass the dollar. To that end, the current plan is to step up the cross-border use of China’s digital currency. China’s huge economic size will help, but as long as the currency is not fully convertible, it will take time for the currency to be fully accepted beyond its borders.”
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