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The correlation in currency movement is most likely a result of concrete steps taken by China over the years to reduce the need for an intermediate currency, tr

The correlation in currency movement is most likely a result of concrete steps taken by China over the years to reduce the need for an intermediate currency, traditionally the USD, in trade between two countries. There's plenty of evidence that the seeds have been planted for a free-floating (potentially gold-backed) Yuan to eventually sit alongside (not necessarily displace) the Euro and USD as a major reserve currency. January 2012: "Sheikhs fall in love with renminbi" http://www.atimes.com/atimes/Middle_East/NA24Ak03.html http://www.atimes.com/atimes/Middle_East/NA24Ak03.html March 2012: "China has signed a $31bn currency swap agreement with Australia, a step towards boosting the renminbi’s profile in developed markets. Beijing has established nearly 20 bilateral swap lines over the past four years, but Australia ranks as the biggest economy yet to sign such a deal" http://www.ft.com/intl/cms/s/0/4b6c4ab6-7404-11e1-bcec-00144feab49a.html http://www.ft.com/intl/cms/s/0/4b6c4ab6-7404-11e1-bcec-00144... April 2012: "This morning, we saw the launch of the first RMB bond outside of Chinese sovereign territories. And it happened here in London. This builds on the progress London has already made toward becoming the western hub for RMB.’ http://citywire.co.uk/global/london-launches-its-first-offshore-renminbi-bond/a582756 http://citywire.co.uk/global/london-launches-its-first-offsh... June 2012: "China and Japan began direct trading of Chinese yuan and Japanese yen in Tokyo and Shanghai on June 1, in a move to boost trade and investment between the world's second- and third- largest economies, and also viewed as a further step to enable the yuan to become a truly global currency." http://news.xinhuanet.com/english/china/2012-06/04/c_131629478.htm http://news.xinhuanet.com/english/china/2012-06/04/c_1316294... June 2012: "China and Brazil strike $30bn bilateral swap deal to reinforce economies. Announcement also includes plans for joint satellite launches, culture centres and language networks http://www.guardian.co.uk/world/2012/jun/22/china-brazil-bilateral-swap-deal http://www.guardian.co.uk/world/2012/jun/22/china-brazil-bil... August 2012: "ZIMBABWE has been urged to follow the example of some Central African countries which have taken the initiative in using the Chinese currency - the yuan. Last month a number of Central African banks were given access to yuan-denominated bonds by the China Development Bank Corporation (CDB)." http://allafrica.com/stories/201208160818.html http://allafrica.com/stories/201208160818.html October 2012: 'Chinese Gold Imports Through August Surpass Total ECB Holdings, Imports From Australia Surge 900%" http://www.zerohedge.com/news/2012-10-21/chinese-gold-imports-through-august-surpass-total-ecb-holdings-imports-australia-sur http://www.zerohedge.com/news/2012-10-21/chinese-gold-import...

luser001 14y ago
Hmm, what evidence do you have that China wants a gold-backed yuan? AFAIK, yuan is at present a fiat currency.
- squidsoup 14y ago
  Isn't the notion of a gold backed currency considered antiquated now? My understanding is that both the US dollar and Euro are fiat currencies as well, the US dollar having abandoned the gold standard in the 70s (http://en.wikipedia.org/wiki/Nixon_Shock http://en.wikipedia.org/wiki/Nixon_Shock).
  - bitcartel 14y ago
    This week's edition of Forbes: http://www.forbes.com/sites/steveforbes/2012/10/03/gold-can-save-us-from-disaster/ http://www.forbes.com/sites/steveforbes/2012/10/03/gold-can-...
  - saraid216 14y ago
    Returning or going to a gold standard is a very regular recommendation by assorted persons. My personal perspective is that it's intuitive, but suspicious, and I'm not willing to invest the momentous amount of time and effort it would take to feel confident in taking one side or the other. (Other people need a smaller investment to feel confident.)
- bitcartel 14y ago
  I've updated the post to clarify, as obviously nobody knows for sure. Many financial pundits think it might happen, with the RMB backed by a combination of gold and a basket of currencies.
  - JamisonM 14y ago
    By "backed by" I think you mean operated as a managed-float with these things as a basis. RMB has lots of influence in Asia because many countries in the region are exporters to the US and Europe and in direct competition with China there. Countries like Malaysia have a managed-floating currency based largely on the value of the RMB to make sure that they can compete effectively with China on a day-to-day basis when dealing in foreign exchange. I believe this is part of the reason analysts tend to give the RMB too much credit, once China grows to the point of higher internal consumption and less export dependency we will see many Asian currencies reforumlate their floats to reduce the emphasis on China.

luser001 14y ago

Hmm, what evidence do you have that China wants a gold-backed yuan? AFAIK, yuan is at present a fiat currency.

squidsoup 14y ago
Isn't the notion of a gold backed currency considered antiquated now? My understanding is that both the US dollar and Euro are fiat currencies as well, the US dollar having abandoned the gold standard in the 70s (http://en.wikipedia.org/wiki/Nixon_Shock http://en.wikipedia.org/wiki/Nixon_Shock).
- bitcartel 14y ago
  This week's edition of Forbes: http://www.forbes.com/sites/steveforbes/2012/10/03/gold-can-save-us-from-disaster/ http://www.forbes.com/sites/steveforbes/2012/10/03/gold-can-...
- saraid216 14y ago
  Returning or going to a gold standard is a very regular recommendation by assorted persons. My personal perspective is that it's intuitive, but suspicious, and I'm not willing to invest the momentous amount of time and effort it would take to feel confident in taking one side or the other. (Other people need a smaller investment to feel confident.)
bitcartel 14y ago
I've updated the post to clarify, as obviously nobody knows for sure. Many financial pundits think it might happen, with the RMB backed by a combination of gold and a basket of currencies.
- JamisonM 14y ago
  By "backed by" I think you mean operated as a managed-float with these things as a basis. RMB has lots of influence in Asia because many countries in the region are exporters to the US and Europe and in direct competition with China there. Countries like Malaysia have a managed-floating currency based largely on the value of the RMB to make sure that they can compete effectively with China on a day-to-day basis when dealing in foreign exchange. I believe this is part of the reason analysts tend to give the RMB too much credit, once China grows to the point of higher internal consumption and less export dependency we will see many Asian currencies reforumlate their floats to reduce the emphasis on China.