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Yuan’s global ascent puts Xi on the spot

TOKYO – The trend is your friend, as they say in the investment game. That can be true, too, of governments if they read the financial tea leaves well enough.

Such is the case with a Chinese currency rapidly coming into its own. The latest data from the Bank for International Settlements (BIS) ranks China’s yuan as the world’s fifth-most-traded currency. But far more noteworthy is that the yuan has leapfrogged from eighth place to fifth in just three years.

Given the political chaos in the UK, and the pound’s collateral-damage status this year, President Xi Jinping’s currency might not need to wait long at all to step into fourth place. By BIS figures, the yuan now accounts for 7% of global foreign exchange transactions, versus 4% in 2019.

Naturally, the US dollar remains the sun of the financial solar system, being used in 55% of all FX trading (and close to 90% of all trade). The euro lost ground in 2022 to a 31% of FX trades level. The yen and pound held largely constant, despite the yen’s 30% plunge this year and the pound’s epic volatility.

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