Yuan: China is Slowly Trying to Replace the US Dollar
- US Dollar hegemony[1] is at risk thanks to changes in the global economy and the long-term consequences of the US-China trade war. China has been working to make the Yuan a more central part of the global economy.
- By issuing debt denominated in USD[2], China is making a long-term bet that it will be cheaper to pay back its loans over time in the US Dollar[3]; it believes the value of the US Dollar will fall.
- Issuing debt in a foreign currency isn’t uncommon; traders may recall that some famous investors rolled over their USD-denominated debt into JPY[4]-denominated debt ahead of Abenomics and the long decline in the value of the Japanese Yen.
Looking for longer-term forecasts on the Chinese Yuan and US Dollar? Check out the DailyFX Trading Guides[5].
US-China Trade War Phase 1 Deal
It was early-October when officials from both China and the United States said that progress had been made towards a Phase 1 trade deal, due to be signed before the end of the year. And yet, with the Thanksgiving holiday descending upon markets, there are no clear indications that a US-China trade war Phase 1 deal will be signed before the end of the year.
Perhaps the most interesting news related to the US-China trade war at the end of November was not about the Phase 1 deal itself, but rather some financing moves China is making at the margins.
On November 25, Bloomberg News reported that the Chinese Ministry of Finance was readying a sovereign debt offering, denominated in US Dollars, to the tune of $6 billion. This debt would come in tenors of three, five, 10, and
