Argentina, South America’s second-largest economy, which has been Mired in a sovereign debt crisis in recent years and even defaulted on its debt last year, has turned to China firmly . According to related news, Argentina is asking China to expand bilateral currency swap in YUAN, adding another 20 billion yuan to the 130 billion yuan currency swap line. In fact, Argentina had already reached an impasse in negotiations with the International Monetary Fund to refinance an outstanding loan of more than $40 billion. Under the twin pressures of a debt default and a strong dollar, Argentina finally turned to China for help.
The swap request is the fifth renewal of the currency swap agreement with China after 2009, 2014, 2017 and 2018. Under the agreement, the People’s Bank of China has a yuan account at the Argentine central bank, while the Argentine central bank has a peso account in China. Banks can withdraw the money when they need it, but they must return it with interest. The yuan already accounts for more than half of Argentina’s total reserves, according to the 2019 update.
In recent years, as more countries have started using the yuan for settlement, demand for the currency has increased, and the currency’s stability as a hedge, Argentina must be seeing new hope. Argentina is one of the world’s largest soybean exporters, while China is the world’s largest soybean importer. The use of RMB in transactions also deepens the mutually beneficial cooperation between the two countries. For Argentina, therefore, there is no harm in strengthening its yuan reserves, which are only expected to grow.
In the latest ranking of international payment currencies, the US dollar continues to fall out of favor and the proportion of payments continues to fall further, while the proportion of international payments in RMB has bucked the trend to a new high and remained the fourth largest. It reflects the popularity of RMB in the international market under the global dedollarization. Hong Kong should seize the opportunity brought by the global allocation of Chinese stock and bond assets, help China promote the internationalization of the RMB, and add new impetus to its own financial development.
The federal reserve board meeting record of member is generally accepted that high inflation levels, support to raise interest rates as soon as possible, open interest rate normalization process there is no suspense in March, but it seems to raise interest rates expected to dollar stimulus is not big, U.S. stocks, Treasury and other dollar assets continue to selling pressure, display safe-haven dollar gradually lost again, money is run away from us dollar assets.
Selling pressure on U.S. stocks and Treasuries continued
If the United States continues to print money and issue bonds, a debt crisis will break out sooner or later, which will accelerate the pace of dollarization around the world, including reducing the holdings of DOLLAR assets in foreign exchange reserves and reducing the reliance on the DOLLAR as transaction settlement.
According to the latest data from SWIFT, the leading international currency, the US dollar’s share of international payments fell below the 40 percent mark in January to 39.92 percent, compared with 40.51 percent in December, while the renminbi, which has been a safe haven currency in recent years, saw its share rise from 2.7 percent in December. It rose to 3.2 percent in January, a record high, and remains the fourth largest payment currency behind the dollar, euro and sterling.
Currency exchange rate steady foreign capital continued to add warehouse
The above data reflect that the us dollar continues to fall out of favor. Diversification of global foreign exchange reserve assets and the use of local currency for transactions have led to a decline in the role of the US dollar in investment, settlement and reserve in recent years.
As a matter of fact, China’s economy has maintained steady and sound growth, showing relatively fast economic growth and low inflation level, supporting the positive exchange rate of RMB. Even if Europe and the United States into the water phase, the market gradually tightening of liquidity, but were anchored the yuan against the dollar, to attract international capital for extra renminbi debt assets, market estimates this year foreign investors bought a net renminbi debt will be a record, up to 1.3 trillion yuan of above, can expect the yuan international payments than share continues to rise, a few years is expected to surpass the pound, It is the third largest international payment currency in the world.
Post time: Feb-18-2022