Widening of the Trading Band, US Yuan Clearing, and Increasing Interest Rates
By JC Collins
A major piece of the POM analysis has fallen into place. As has been predicted here for the last two years, the Chinese renminbi has been added to the Special Drawing Right basket of the International Monetary Fund. This fundamental change in the composition of the SDR will allow for a more sustained and balanced adjustment to the international monetary system.
This first step towards stabilizing the global system will spur renminbi liquidity growth and begin the process of foreign exchange reserve diversification. This diversification will ease the international pressure which has been fostered upon the US dollar in its role as primary reserve currency.