– China To Launch Yuan Swap Trading With Russian Rubles On Monday (Zerohedge, Dec 26, 2014):
The world was slow to wake up to the new reality in which China is now the de facto IMF sovereign backstop, as Zero Hedge described two weeks ago in “China Prepares To Bailout Russia” when we noted that a PBOC swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze, something we first noted over two months ago in “China, Russia Sign CNY150 Billion Local-Currency Swap As Plunging Oil Prices Sting Putin.”
In fact, it was only this week that Bloomberg reported that “China Offers Russia Help With Currency Swap Suggestion.” But in order to fully backstop Russia away from a SWIFT-world in which the dollar reigns supreme, one extra step was necessary: the launching of direct FX trade involving the Russian and Chinese currencies, either spot or forward – a move away from purely theoretical bilateral FX trade agreements – which would not only enable and make direct currency trading more efficient by sidestepping the dollar entirely, but also allow Russian companies to budget in Chinese Yuan terms. It is no surprise then that this is precisely the missing step that was announced overnight, and will be implemented starting Monday.
From Bloomberg:
China will allow trading in forwards and swaps between the yuan and three more currencies in a bid to reduce foreign-exchange risks amid increased volatility in emerging markets.
The China Foreign Exchange Trade System will begin such contracts with Malaysia’s ringgit, Russia’s ruble, and the New Zealand dollar from Dec. 29, it said in a statement on its website today. That will extend the yuan’s swaps trading to 11 currencies on the interbank foreign-exchange market.
A plunge in Russia’s ruble this month to a record low sparked a selloff in developing nations’ assets, leading to a surge in currency volatility. The new contracts come amid efforts by China to increase the international use of the yuan, as the world’s second-largest economy promotes it as an alternative to the U.S. dollar for global trade and finance. Malaysia and Russia are China’s eighth and ninth biggest trading partners, according to data compiled by Bloomberg.
“This will provide companies with better hedging tools, and at the same time, make currency trading more efficient,” said Ju Wang, a senior currency strategist at HSBC Holdings Plc in Hong Kong. “China won’t stop yuan globalization or capital-account opening because of the volatility in emerging market currencies.”
The CFETS is an agency under the People’s Bank of China.
So while the US continues to parade with “destroying” the Russian economy, even if it means crushing the shale industry, aka the only bright spot, and high-paying job-creating industry in the US economy over the past 5 years, Russia and China continue to be nudged by the west ever closer monetarily and strategically, until one day, as we have long predicted, China and Russia will announce a joint currency, one backed by both China’s “surprising” gold reserves and Russia’s commodity hoard. Then things will get interesting.
Launch it on Monday? They launched it in November of 2010. However, they are finally going public with what some of us have known for years. The entire idea of a world reserve currency is obsolete……and that is a fatal blow to the US domination of the world economy.
BRICS ought to have made it clear last Summer. I guess they feel very secure now…..let me work from memory:
Brazil, and much of South and Central America have joined BRICS in favor of the basket of currencies, leaving the US dollar out of their international trades.
The same with South Africa and most of the emerging African economies.
The same with Australia and New Zealand.
The same with Russia, India, China, Japan, Switzerland, Turkey, Iran, Qatar and other middle east nations who are already doing business with BRICS members, going around the dollar. OPEC’s open disdain for the US request to slow production tells anyone with sense that they are next. The US has abused it’s status as the world reserve currency, replaced diplomacy with bullying.
Add in Canada……and others I cannot recall.
Over 70% of the world nations have dumped the dollar since Hugo Chavez started the open basket of currencies with an electronic currency to translate value in Spring of 2010. Russia and China set up the same trade agreement with each other in November of 2010. Since then, they have recruited nearly three quarters of the world……..the US is on the losing side of this game.
The EU continues to use the dollar, but Germany just put in a demand that Bush, Cheney, Rice, Rumsfeld, and the other war criminals from that administration be put on trial in the world court for their many misdeeds. If the US refuses, Germany and the rest of the EU will dump the dollar, and it will collapse. The EU is the only large economy holding the dollar afloat.
If the US were still a nation of law, and not just for the benefit of a few greedy guts, they would put the bush people on trial with the world court. If they did that, they would retain some credibility, and begin to fight back against this economic war being waged upon them.
My guess is that they will refuse, the Germans and the rest of the EU will join BRICS and dump the dollar. BRICS has put up a large pool of money to loan to cash strapped smaller states who need to borrow, but want to avoid US financial domination. BRICS is there, ready and willing.
Right now, the US can claim the Saudis and Israel as allies.
Out of 196 nations, that is a pretty poor rate, on a school paper, it would score an F.
If US leaders don’t take their heads out of the sand and start acting like a nation of law, it will lose everything. As for US citizens, they will really suffer….