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Yuan passes Yen to become 4th most used currency

China Great Long term opportunity

The Yuan continues to gain traction in its quest to become the World’s reserve currency. In just a few short years it has moved from the number 12th spot (2012) to the number 4th spot. It displaced the Yen recently and in doing so became the 4th most used Currency for Global Payments.  The proportion of trade attributed to the Yuan jumped from 2.34% in July 2015, to  2.79% in August.

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“The data are positive for the probability of the yuan getting into the SDR basket,” said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong who predicted in January that the currency would surpass the yen in global usage this year. “It shows that the so-called devaluation in August, which wasn’t massive in value, hasn’t driven people away from using the yuan.”

More nations are embracing the Yuan as they seek to reduce the dominance of the US dollar, which unfairly allows the U.S to create money out of thin air without fear of repercussions. Any other nation that attempts to take that path usually suffers a terrible fate. Now this hegemony is being challenged both by Russia and China and as a result of this a host of nations are conducting bilateral deals that bypass the dollar.

The People’s Bank of China has appointed yuan-clearing lenders in a host of countries including  Britan, Switzerland, France, South Africa, Argentina, etc. over the past 12 months. This number is destined to grow exponentially in the years to come.

The top status is still held by the USD, followed by the Euro and British Pound. Given the speed at which nations are embracing the Yuan, the British pound will be displaced in a relatively short period. It currently accounts for 8.5% of global payments.

Game Plan

The strategy is simple; China is destined to become the number one player in the world and as a result, its stock market will also rise exponentially over the years. Hence, from a long-term perspective now is the time to be buying China.  Astute investors should compile a list of stocks that they would like to own over the long haul and slowly start establishing long term positions now. Use healthy market pullbacks to add to or open new positions.  The trend is your friend everything else is your foe

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