Not the “Death of the Dollar” but “Death of the Euro?”
The rise of the Chinese yuan as an international currency is not only unstoppable but is advancing in leaps and bounds, according to SWIFT. It comes at the expense of other currencies, though it’s not triggering the long-awaited “death of the dollar.” On the contrary. Yet the euro has stumbled into the line of fire.
SWIFT is in a position to know. The member-owned organization, based in Belgium, provides among other things a network that enables financial institutions around the globe to send and receive information about financial transactions in a standardized environment. It also cooperates with various intelligence and law enforcement agencies around the world, including the US Treasury, the CIA, and others. The NSA is likely to get what it wants without asking.
In its latest RMB Tracker, SWIFT is relentlessly effusive about the rise of the yuan. In August, global payments in renminbi rose once again, achieving another milestone: it edged out the yen to become the fourth largest payments currency with a share of, well, 2.8% of global payments – “reflecting RMB’s huge potential and staggering momentum as a major currency,” the report gushes.
That’s not exactly a lot, compared to China’s economic power in the global markets. When China sneezes, as it just did, the world catches pneumonia. But it’s a big leap forward: In August 2012, the yuan was in 12th position, with a minuscule share of 0.8%.
In the Asia-Pacific region, the yuan is already the most actively used currency for intra-regional payments with China and Hong Kong, having edged out the yen this year.
Becoming a major global currency is one of the preconditions for becoming a reserve currency held by central banks as part of their foreign exchange reserves baskets. But the yuan isn’t in those baskets yet.
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