BRICS China Dumping US Dollars: Is the Yuan Taking Over?
Is the shift away from the US dollar accelerating? Recent news highlights that BRICS member China saw its currency, the Yuan, rise against the US dollar in the foreign exchange market. This has sparked debate about the future of global finance and the potential for a new world order.
Yuan Surges as China Dumps USD
The Chinese Yuan was the most visible mover as it surged more than 0.3% against the dollar. This movement coincides with reports suggesting deliberate action by China to influence the currency market.
Reports indicate that China’s Central Bank dumped the US dollar in the currency market for three consecutive days in December this month. The Chinese state-run banks sold US dollars in the spot foreign market, a clear signal of their intent to support the Yuan.
The question now becomes: Why is the BRICS country eager to put the US dollar down to keep its currency, the Yuan alive? Was the price fluctuation normal or did external forces influence the currency to rise? In this analysis, we delve into the motivations and potential consequences.
BRICS and De-Dollarization: A Realistic Goal?
The movement is often framed within the broader context of BRICS nations seeking to reduce their reliance on the US dollar. While BRICS nations discuss reducing dollar reliance, replacing it is unlikely anytime soon due to their reliance on U.S. markets, lack of a unified financial system, and the inherent complexities of establishing a viable alternative reserve currency.
However, the expansion of the BRICS bloc, as suggested by The expansion of BRICS to “BRICS-Plus” with the incorporation of countries such as Iran and Saudi Arabia questions its impact on the dollar. China and Russia explore alternative financial systems, raises new questions about the dollar’s long-term dominance. This expansion, with countries like Iran and Saudi Arabia joining, could potentially reshape global financial dynamics.
The Future of the Yuan
While China's actions clearly demonstrate a desire to strengthen the Yuan and decrease reliance on the US dollar, the path forward is complex. Factors such as the stability of the Chinese economy, the Yuan's convertibility, and the willingness of other nations to adopt it will all play a crucial role.
China’s Central Bank dumped the US dollar in the currency market for three consecutive days in December this month. The Chinese state-run banks sold US dollars in the market, indicating continued effort to influence the Yuan’s value.
Ultimately, the competition between the Yuan and the US dollar is likely to be a long and evolving process, shaped by economic and geopolitical forces.