Wednesday, December 2, 2015

China's renminbi will become a reserve currency, but this doesn't hurt the US dollar (contrary to speculation)

Keith Bradsher writes in the New York Times on Tuesday, December 1, 2015, that the IMF has designated China’s renminbi as a global currency, story here.

That should make the US stock market generally less reactive to China’s behavior, as happened late this summer.  The IMF action, according to a chart on p. B6, leaves the portion of market basket for reserve currencies held by the US dollar almost the same, but reduces the portion claimed by the euro.  This contradicts predictive claims by Porter Stansberry and Ron Paul that the dollar’s position in this basket would collapse.

Update: Jan. 3, 2016

Fareed Zakaria says that China's will be only the fifth in the marketbasket of drawable reserve currencies. The others are the dollar, the euro, the pound sterling and the yen. 

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