Losing Faith In US Dollar: China Signing Renminbi Currency Swap With Argentina

This article in FT highlights that the world is slowly losing faith in the US as a reserve currency. China has just entered into a swap agreement with Argentina to receive Renminbi instead of US dollars. The swap aids China in its goal to replace the US dollar with the Remnibi as the world reserve currency. It will not happen immediately, but it is happening.

From FT:

China and Argentina in currency swap

China, which is pushing to end the dominance of the dollar as a worldwide reserve, has agreed a Rmb70bn currency swap with Argentina that will allow it to receive renminbi instead of dollars for its exports to the Latin American country.

Beijing has signed Rmb650bn ($95bn, €72bn, £67bn) of deals since December with Malaysia, South Korea, Hong Kong, Belarus, Indonesia and, now, Argentina in an attempt to unblock trade financing that has been severely curtailed by the crisis.

China has suggested replacing the dollar with an enhanced version of the International Monetary Fund’s unit of account, the special drawing right or SDR. The dollar’s future as the world’s reserve currency will be on the G20 agenda.

Economists say the SDR plan is unfeasible for now but see Beijing’s currency swap deals as pieces in a -jigsaw designed to promote wider international use of the renminbi, starting with making it more acceptable for trade and aiming at establishing it as a regional reserve currency in Asia, something that would also enhance China’s political clout.

The deals underscore China’s loss of faith in the dollar amid the fallout from the world financial crisis. The Argentine accord will also boost China’s financial presence in Latin America.

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