IMF: China's Yuan to Become a Reserve Currency

[What Would Jesus Do?]

It will join the "basket" that now includes the dollar, pound and euro.

The IMF says it meets the criteria and will be approved later this month. It will actually begin to operate as a reserve currency later next year.

I'm a little surprised that the IMF says it meets the criteria. Not that I know what the criteria are, but I would have thought they would have to let the yuan float against other currencies before it could join the basket.

Can someone here who knows more about this explain it?

 

[What Would Jesus Do?]

In addition to this news, we see Japan slipping into recession.

I would have thought that news like that might sadden the market but all the markets are giddy today. Even the Nikkei. Why is that?

 

[What Would Jesus Do?]

Won't the addition of the Yuan as a reserve currency tend to drive down the value of the dollar? Nations will need to hold fewer dollars since they will be able to trade directly in yuan. Lower demand for dollars = lower cost of dollars.

Sure, that has been on the horizon for a while. So we might just see this as a baby step in that direction. But what will the impact be?

 

[UNIowaHawk]

This kind of surprises just because of all the uncertainty of their books. That being said, China holds a lot of foreign debt so it wouldn't surprise me one way or another if there were some behind closed doors agreements with certain individuals.

 

[Titanhawk2]

Won't the addition of the Yuan as a reserve currency tend to drive down the value of the dollar? Nations will need to hold fewer dollars since they will be able to trade directly in yuan. Lower demand for dollars = lower cost of dollars.

Sure, that has been on the horizon for a while. So we might just see this as a baby step in that direction. But what will the impact be?

Then can't we get more of the dollar out of circulation?

 

[What Would Jesus Do?]

Then can't we get more of the dollar out of circulation?

Good thought, but how?

My fear is that this will be incentive for the "printing" of more "money" by private concentrations of power - such as through the issuance of more dollar-denominated stocks, bonds, derivatives, options, etc.

 

[86Hawkeye]

In addition to this news, we see Japan slipping into recession.

I would have thought that news like that might sadden the market but all the markets are giddy today. Even the Nikkei. Why is that?

Japan has been in and out of recession for the past 20-25 years.

Their national debt is >200% of GDP.