Major Chinese banks ditching US dollar to prop up domestic currency

RT – July 3, 2018

China’s state-owned banks have reportedly been buying US dollars in forwards on behalf of the central bank (PBOC) and immediately selling them on the spot market for yuan to support the domestic currency.

PBOC deputy governor and head of the foreign exchange regulator Pan Gongsheng said China was confident it could keep the yuan basically stable and at a “reasonable” level.

A government central bank buys domestic currency when it wants to strengthen it. By protecting the buying power of domestic currency the country protects its citizens from inflation risks and rising consumer prices.

The government can also weaken domestic currency by selling it on the foreign exchange market. While hurting the domestic consumer, this step helps major export economies, such as China. It makes export goods cheaper to produce at home and, therefore, more competitive on the global market.

“It feels like the state-owned banks are stocking up on bullets to prevent the yuan from falling too much,” an unnamed trader at a Chinese bank in Shanghai told Reuters.

In early trade on Tuesday, yuan weakened to a low of 6.7204 against the dollar, the lowest since August 7, 2017. The Chinese currency’s downturn comes ahead of July 6, when US tariffs on $34 billion worth of Chinese goods are to kick in. Beijing has promised to retaliate with tariffs on US products.

https://www.rt.com

Russia-China bond market play could kick-start new dollarless financial system

RT – December 4, 2017

The Moscow stock exchange will soon issue nearly $1 billion-worth of yuan-denominated bonds. It could become the start of a new financial system not based on the US dollar, analysts say.

Russia will issue the 6 billion yuan (about $900 million) bonds with a five-year maturity in December or January. The Central Bank says it is testing the water for future investments.

Such steps will make it possible to remove the dollar from mutual settlements and use only yuan and rubles (mostly yuan for the moment) in the mid-term, if more specialists from the Russian financial sector work in this direction,” Gleb Zadoya, Head of Analytics at Analitika Online told RT.

Russian bonds in yuan could be interesting for the Chinese, as China has trillions of dollars of excessive liquidity, as well as hundreds of thousands of new investors who are interested in trying new markets, the analyst said.

https://www.rt.com

Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

Tyler Durden – Apr 2, 2017

The Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade.

According to the South China Morning Post the new office was part of agreements made between the two neighbours “to seek stronger economic ties” since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

According to Dmitry Skobelkin, the deputy governor of the Central Bank of Russia, the opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia.

http://www.zerohedge.com