Australia and China Strike Another Nail into the US Dollar for Independence Day
In a move that has slipped under the radar of even the alternative financial media, China celebrated Independence Day by handing the US Dollar’s reserve currency status another severe flesh wound.
China moved Wednesday to make Australia the first G20 nation with the ability to directly convert its currency into Chinese yuan, bypassing the US dollar.
The writing is on the wall for the dollar’s reserve currency status.
Australia is hoping to become the third country in the world to be able to directly convert its currency into Chinese yuan.
The Treasurer Wayne Swan will push the case at a currency forum in Hong Kong and during meetings with Chinese leaders in Beijing next week.
Analysts say Australia’s push to directly convert its currency into yuan will make trade with China more efficient and will lower transaction costs, particularly for the country’s big miners and importers.
ANZ currency strategist Andrew Salter says currently they have to go through the US dollar or Japanese yen first.
“You don’t have to do that interim step – you can convert directly from renminbi into Australian dollars and therefore avoid one layer of transaction costs associated with the deal – so primarily a means to remove that extra layer of cost, so its an efficiency advantage,” he said.
However, Mr Salter says the deal is unlikely to move currency markets, as China’s capital account remains shut.