We expect the IMF to confirm on Monday the Yuan will indeed be included in the SDR basket, and this could weaken the position of the US Dollar around the world. One of the main reasons why the US Dollar gained a lot of strength lately wasn’t because of the ‘strong’ economic situation in the USA, and it wasn’t because the market was anticipating a rate hike. No, the US Dollar was appealing as a world reserve currency because it was worldwide seen as a safe currency but now the Yuan is being accepted by the IMF as part of its Special Drawing Rights basket central banks all over the world might be tempted to convert some US Dollars into Yuan as the Chinese currency will gain a lot more credibility and legitimacy overnight due to the decision of the IMF.
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