U.K. All Set to Borrow Money in Yuan
For decades analyst of predicted the future of using the U.S. dollar as the default global currency are coming to an end. For those prognosticators, Thursday's annoucement that the U.K. will soon begin borrowing money in Yuan is seemingly another point for their score board. According to a CNN Money report:
"Most countries hold their reserves in U.S. dollars or euros. The U.K. is no exception, although it does have smaller amounts of Japanese yen and Canadian dollars. Investors will be given more details about the U.K. bond on Monday.
The first sale is likely to be relatively small, raising perhaps the equivalent of just $300 million. But if other countries follow suit, the yuan will gain new stature in global currency markets. Beijing has kept tight control of the yuan in the past, limiting money flows in and out of the country and holding down the exchange rate as a way to boost manufacturing and exports."
Of note to U.S. based precious metals investors is the importance a local currency has to the value of gold and other commodities. In short the stronger a currency the less it costs to purchase a given commodity. The weaker a currency the more expensive the cost of a commodity. Should the USD index begin to soften look for several commodities to increase in costs directly related to the drop in currency.
In the ongoing race to debase currencies, many analyst speculate that the Yuan is likely to fall in the coming years as the Chinese economy deteriorates. This will make repayment in Yuan much cheaper than in Pounds, Dollars or Euro. China is trying to strengthen commercial relations with countries including the U.K. as it seeks to expand trade.