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The internalization of RMB grows, threatens to leave US dollar behind



The use of the renminbi (RMB) as a trading currency and in international payments has increased recently with more and more countries initiating RMB settlement business.

By transactional value, RMB is now one of the six most-used currencies in the world with its shares increasing 1.79% according to the World Bank Interbank Financial Telecommunications Association (SWIFT). Its use as trade settlement currency is expected grow more in the coming years.

During the China and US trade war, China was buying large quantities of gold to hedge against the value of its dollar holdings. The country was also testing its digital currency the e-RMB which also posed a challenge to the dollar.

As the internalization of RMB grows, it challenges the US dollar

The US national debt has reportedly exceeded 26 trillion US dollars. Analysts have indicated that the fast increase in US Treasury bonds may leave an impact on the fiscal budget and consequently exacerbate the current financial crisis. The United States’ management of the negative impact on its economy will show if the dollar can endure.

The US dollar still has a stable position and the US exchange rate risk is very low. More than 60% of the world’s currency reserves are in dollars and the dollar is still used for the majority of global commerce.

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The internalization of RMB grows, threatens to leave US dollar behind

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