As Petro-Yuan Looms, Bundesbank Adds Renminbi To Currency Reserves

Just days after China's (denied) threat to slow/stop buying US Treasuries, and just days before the launch of China's petro-yuan futures contract, Germany's central bank confirmed it would include China's Renminbi in its reserves.

The FT reports that Andreas Dombret, a member of Deutsche Bundesbank’s executive board, said at the Asian Financial Forum in Hong Kong on Monday that the central bank had “decided to include the RMB in our currency reserves”.

He said: “The RMB is used increasingly as part of central banks’ foreign exchange reserves; for example, the European Central Bank included the RMB [as a reserve currency].

The Bundesbank’s six-member board took the decision to invest in renminbi assets in mid-2017, but it was not publicly announced at the time. No investments have been made yet; preparations for purchases are still ongoing.

The inclusion in the German central bank’s reserves basket underscored China’s increasing prominence in the global financial landscape, and reflected policies aimed at making the currency more freely tradable internationally.

Mr Dombret said:

“The notable development from the European point of view over the past few years has been the growing international role of the RMB in global financial markets.

The offshore Yuan strengthened on the news overnight - pushing to its strongest in over 2 years...

https://www.zerohedge.com/sites/default/files/inline-images/20180115_dollar1_0.png

And as Les Echoes reports, while the Bundesbank wants to integrate the yuan into its foreign exchange reserves, the Banque de France is already using it as a currency of diversification.

The Banque de France has raised a corner of the veil on its strategy of managing foreign exchange reserves.

"The foreign currency holdings remain overwhelmingly invested in US dollars, with diversification to a limited number of international currencies such as the Chinese renminbi."

Which currency would you rather hold as a stable reserve?

https://www.zerohedge.com/sites/default/files/inline-images/20180115_dollar.png

The US Dollar has been quite volatile over the last 18 months against a broad basket of its largest trading partners.

The Chinese Renminbi, however, has been very stable over the last 18 months against a broad basket of its largest trading partners (despite volatility against the dollar).

As a reminder, last week, the People’s Bank of China decided to drop a mechanism it recently created to support the renminbi and safeguard it against capital flight, in a sign of rising confidence in the currency. Mr Dombret said the move was “something which we welcome very much”.

 

Comments

Baron von Bud MozartIII Mon, 01/15/2018 - 20:55 Permalink

I agree. The only way to get people working here again is to lower the dollar. The poor get employed and the price of imports rises. But a falling dollar means higher long rates and with $22T of debt it's very bad. So, yes, the world financial landscape is forced to change. New relationships and new ideas of how the world should be run. The ride down will not be fun.

In reply to by MozartIII

MK ULTRA Alpha SickDollar Mon, 01/15/2018 - 21:53 Permalink

YOU are a Bitcoin Bitch. The dollar isn't sick idiot, the global economy is booming since the federal reserve didn't increase rates at an accelerated rate, therefore, countries with foreign debt didn't have to buy dollars with their currency to service the foreign debt.  Thus, there is a temporary lack of demand for dollars. And I haven't seen short interest in the dollar, we could experience a short squeeze driving up the dollar, this is a recurring theme if one were paying attention.

We are a long way from your dream of the dollar dying, resulting in the end of America. Now get back to whining about how bad America is when all the other countries do the same shit.

In reply to by SickDollar

JIMSJOE2 SickDollar Tue, 01/16/2018 - 05:07 Permalink

The current dollar weakness is a massive coordinated effort for several reasons. First the FED is desperate to create dollar weakness for months and has been using its usual minions to do so not only for US exports especially commodities but also for the money center banks who have lent trillions in dollar denominated loans to foreign entities and these are difficult to service with a strong dollar. The FED also knows Europe collapses this year and this has been a process from 2011 as capital has been moving into dollars and US equities and they want to stop this from flowing into dollars and dollar bases assets hence the minions all claiming the dollar is doomed and US markets are overvalued. This capital flight has caused the FED enormous problems in their plan to bring back yield.

     Also with the new tax plan trillions will be flowing back to the US from US multinationals and they will be converting their foreign currency holdings back to dollars. Currency traders in London and NY have been shorting massively the EUR/USD and GBP/USD and going long on the USD/JPY creating additional dollar weakness so they can make additional profits on the exchange rate conversions on top of the regulars profits they are also holding. They know they have a short window to accomplish this and starting in the middle of this year the capital flight out of Europe will accelerate back to dollars and dollar based assets. A strong dollar is not good for the US or the international financial system, businesses, banks, etc.

    Now as this capital from the multinationals flows back to the US a great deal of this will flow to increasing dividend yields and share buy backs. What do you think this is going to do with prices in markets? Keep rising of course. These firms would also like to see US equities lower but the minions are having a difficult time accomplishing this. They were able to move the dollar weaker but that is about it. Currently EUR/USD is over 122, pound is moving to 138 and the USD/JPY is under 110 all accounting for the recent short term dollar weakness.

   Currently gold is around 1339 and is between the 1362 reversal level and the 1300 resistance level. As they continue to weaken the dollar gold could move back to the 1362 level again and then watch out. Folks you do not want to be on the wrong side of this coming move down later this year. This is a classic slingshot reversal move that the "smart money" is setting others up for. As with the euro strengthening and gold moving higher the "dumb money" is moving into these assets all claiming everything is fixed in Europe and gold is going to finally shoot to the moon. Folks this is simply not correct. When this moves happens look for the metals promoters all claiming the "cartel" is suppressing price again. These people are clueless and do not understand what causes price movement in markets. 

   Europe is in serious financial trouble and the EU, euro, many banks, corporations and countries will not survive. Armstrong Economic computer models are forecasting that in 2018 both the Monetary and the Sovereign Debt Crisis hits there along with the pension crisis as I have commented before. A shit storm is coming to Europe and cannot be stopped. The consulting firm should know as their computer models track both domestic and international capital flows and many of their clients are in Europe so they have a direct line of what is going on. They recently were in Europe holding emergency meeting with clients. Even China's PBOC is so concerned it flew in officials and met the firm's staff in London. Even the EU officials are so concerned they ask for consultations and the staff flew to Brussels. These firms are institutional investors, large financial firms, multinationals who need to manage their foreign currency holdings, hedge funds, traders and even some central banks and governments. Folks this is the "smart money" and most are still moving capital out of Europe.

   Folks these are the global macroeconomic events happening outside US borders which effects price movement in US markets and has been since 2011 and will continue. For the last 3 or 4 years the net has been full of total nonsense that the dollar and Dow will collapse and China and Russia want to destroy the dollar and are dumping treasuries. The fact is the opposite is happening as China now holds over $1.2 trillion in these and Russia has over $100 billion. Do you really think they want these assets to collapse? Not a chance in hell! 

   To show you how accurate these models are back in 2009 they forecast as we move forward the Dow would hit 22,000 then 23,000 and eventually to around 40,000 all due to capital flight. We have hit the first two targets. The 2018 forecast are 25,000 and then over 28,000 and the first target has already been hit. They also forecast that the worst for the Dow is a normal correction at a maximum 8% before moving higher. One reason is that the collapses in 87, dot com bust and in 2008/9 were all caused when there is a high concentration of retail directly in markets, they get spooked and sell moving prices low enough to trigger the HFT algo sell orders and off we go. Today we do not have this high concentration directly in markets as it is under 50% from its peak as most have bought into the collapse bullshit. Most retail has their assets in managed accounts.

   In June of 2016 the models forecast that if gold did not break the 1362 reversal level at July's close we would see weakness indicating again the capital flight has accelerated and is moving again into dollars and dollar based assets. Gold dropped from 1362 all the way to around 1100 and the dollar gained massive strength. There was so much being converted from euros to dollars that this created dollar shortage in foreign markets. This prompted the FED to ask all central banks to flood the system with dollars. China which is a huge importer of US commodities and seeing these be too expensive dumped massive amounts of treasuries and dollars not only for themselves but the whole international financial community complying with the FED's request. Again since early 2017 they have been restocking what they sold and now have over $1.2 trillion in dollar based assets.

 When this was all happening the metals promoters were all claiming that China and the BRICS were all dumping dollars and treasuries as they wanted to collapse these assets. Folks these people are clueless! This is what the internet has become.

  Again the shit is going to hit the fan in Europe as Brussels, the ECB and government officials in most EU countries has completely mismanaged the financial and economic system They have destroyed the traditional banking model there and most countries are bankrupt. Spain had over 67 billion euros in their pension fund and now has only around 2 billion as Rajoy and his cronies used it to prop up the country and will run out in 2018. If Rajoy thinks just Catalonia is a problem wait until later this year when funds completely run out. Mayors across France ask the government for help as they too are all broke from the migrant crisis. 50% of all German cities and provinces are broke for the same reason. Italy has announced they are working on a plan to abandon the euro and another bank there is in trouble. Now Brussels went into panic mode and wants members to pay 25% more, place a tax on all financial transactions and be able to tax directly all EU citizens and businesses. These people are desperate and this will only accelerate capital out faster. 

   If you look at all of the above would you park capital anywhere in the EU? Comparing the EU with US, the latter is poised to grow and the EU is going south. It is as simple as that!

   By the way the ECB has had a currency swap agreement with China for a number of years as China likes to do trade deals directly with countries and not the EU which has pissed off EU officials. Central banks in member countries use the ECB to obtain yuan as needed to settle trade. They were forced into currency swaps because of the massive dollar strength which increased trade settlement cost. The ECB is the only central bank that is increasing yuan reserves as yuan holdings by central banks has been going down every single year. What does that tell you about the ECB?

In reply to by SickDollar

MK13 MozartIII Mon, 01/15/2018 - 21:00 Permalink

This is china undermining US to prevent spike in value of US dollar as US companies holdings from abroad come home. What kills the China and  EM is spike in dollar value - the dollar denominated debt would be hard to pay off.

China sells off us treasuries to weaken safety aspect of US dollar; buys euro; buys euro politicians to guarantee RMBS is included as EU reserve currency.

Anyone notice big boys silence about dollar move this year? Anyone thinks GS and big boys can't read the tape and don't have their ears to the ground in HK, DC, Europe?

In reply to by MozartIII

unklemunky MK13 Tue, 01/16/2018 - 08:14 Permalink

China sells off treasuries..price drops....yield pops...others step in and buy us treasuries.  Sorry people, the usd is not going anywhere..and for you retards clapping for the end of the petro dollar...it seems to me since the US is pretty much drilling for its own oil, the concept of a petro dollar is irrellevant.  Besides, the entire homo EU community is banking on windwills and solar panels. What fuckng idiots.

In reply to by MK13

MozartIII Mon, 01/15/2018 - 20:40 Permalink

"The US Dollar has been quite volatile over the last 18 months against a broad basket of its largest trading partners."

Ok, what about 1973/74, 1980/81, 2001, 2008 ect. Renminbi is not the basis for world wide loans. Wait another 7 years or so. Then we can talk about the USD loosing reserve status. What then? It will still exist, it will also still float like the others. Like the world has not seen this before....

Never mind, it has, and no one has studied history.

Consuelo MozartIII Mon, 01/15/2018 - 20:55 Permalink

 

 

Was there a One Belt, One Road initiative underway during those years...?   

Was China the manufacturer to the world during those years?

Did China have resource agreements all over the globe with key resource-rich nations?

Did China have a military and technological prowess during those years?

And how much gold did China have during those years?

How much gold does the U.S. have today...?

Let's address key questions like this in the context of a rapidly changing geopolitical landscape, highly unlike those years past, and perhaps get our perspective straight...

In reply to by MozartIII

JibjeResearch Consuelo Mon, 01/15/2018 - 21:06 Permalink

Yes, the Belt and Road Initiative (BRI) is the key to China's success. 

If EU goes along the BRI, which some EU nations are warming up to, it will be very hard for the US to dominate China.

 

All of your questions are the right questions for our (US) leaders.  If they have the right answers, Americans will not suffer as much .. else, get ready for pain.  It's coming...

 

In reply to by Consuelo

JibjeResearch Lost in translation Mon, 01/15/2018 - 22:06 Permalink

When BRI is in full motion, the nations that are connected to BRI is part of the one world. 

The EU and other small nations must specialize in something or else the Chinese will mass produce those nations into slaves.

Macron is right, the BRI must be a two ways road.

If EU supports BRI, the US will be quicken into a wall..., I think it could be the wall Trump is trying to build ....

That would be classic!

In reply to by Lost in translation

TeethVillage88s Consuelo Mon, 01/15/2018 - 21:07 Permalink

Only matters what Belt or Level you are.

- I am Mandan
- I am JoDan
- I am 8th Degree Dan
- God-Damn
- Power, Status, Titles, Position, Control, Access, Fraternal Network, Association, Fraternity, Secret Ivy League Society, Diplomatic Status, Secret Service Protection, Mercenary Protection

LOL

Power is mostly about Status & Position, but at times it is about level, accomplishments, Titles... Today Power is about Trade and Secure Currency... Military Power... World Reserve Currency... Stewardship of WRC... Inflation, Debt, Asset Ownership, currency inflows & outflows of WRC... Economic Strength not statistics... economic strength not GDP and Household Debt to Savings/Household Income is much more important in the "Long Term Strategic Planning and National Security beside the stable value of the National Currency, Production Capability, and "Ability to Mobilize as a Nation At War".

- TeethVillage, Dental Assistant

In reply to by Consuelo

MK ULTRA Alpha WFO Mon, 01/15/2018 - 21:43 Permalink

For us commoners, silver is the best bet. There may not be a gold market accessible for unloading higher priced gold in a meltdown. Silver would facilitate barter and would be the only way to purchases goods and services.

I've slowed down preparation by a month,  it's time to get back to making preparations. Not just a bug out bag, but everything needed to survive in the coldest 30 below zero weather, why, because if you don't have the gear, then you can't survive the cold. The great benefit of super cold northern regions is sparsely populated, water and game, and plenty of ground cover. The cold is your friend.

Make sure you have a dog to alert you and a weapon for protection, but if you don't have the gear, then die in the cities and suburbs. Added note, any national emergency can shut down food shipments, within 72 hours of a national meltdown, war, or any reason, 150 million people out of 350 million (counting illegals) will begin food riots. Within seven days they begin to eat cats and dogs, within ten days, they begin to eat people.

In reply to by WFO

IronForge Mon, 01/15/2018 - 20:45 Permalink

CHN need to stock up on Au to back their SIEX(correct acronym?). 

Why would they need to make purchases of USTs the Top Priority?

They have a steady stream of USDs coming from Exports which can be used to purchase USTs and/or Au.

Guaranteed Au convertability via PetroCHY contracts - tying Au, Petroleum, and CHY as the new Globally acceptable Currency (nevermind being a reserve currency) together -  is simply Pure Genius.

 

Consuelo IronForge Mon, 01/15/2018 - 20:59 Permalink

This.

 

Too much focus on who wants reserve currency status.   Who says the Chinese want reserve currency status - Xi himself...?   China does not need reserve currency status to be successful, nor overtake the U.S. in key strategic areas.   It simply needs willing trading partners, a solid manufacturing base capabilities, and gold.

Gee - come to think of it, there was another nation at one time which had said attributes and they did pretty well...

In reply to by IronForge

JibjeResearch Mon, 01/15/2018 - 21:01 Permalink

The Germans are smart.  They know what is coming.

The Yuan reserve status is coming, but the USD is not going anywhere. 

China will be in the driver seat.  They will dictate the USD.  This is a bad thing for America because we are at their mercy.

It's not the end of the USD.  

We can still dominate the global business community if we can control cost: social benefit and DoD.

 

All of us must hedge accordingly.

 

JibjeResearch MK13 Mon, 01/15/2018 - 21:14 Permalink

Correct!  It's why the BRI was started in 2013.  The BRI is to create highways for resources to come to China and China sends out Yuan/Gold.

 

Remember the PetroDollar?  Well, a Chinese version of that is ResourceYuan.  This will give China the ability to create a bond market as large as the US. 

 

The PetroDollar allowed the Fed to print, and they are printing it.

The ResourceYuan will allow the Chinese to print, and they will.

 

Let's keep it short.  There is a wealth transfer because everybody will print. I hope you have a big container for all the overflowing wealth.

 

 

In reply to by MK13