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Can the redback ever replace the greenback?

First published: Nikkei Asian Review, 4/12/2014

The significance of the yuan in global finance is increasing steadily, reflecting China’s status in the world economy and financial policy initiatives by Beijing. The notion, though, that the yuan could become a major reserve currency, even displacing the U.S. dollar one day, is far-fetched.

The spotlight on the yuan has increased in light of three developments.

First came the major blow to the U.S. economy and its prestige in the wake of the global financial crisis, when China’s response was swift and robust.

Second, China started a few years ago to permit offshore trading in the yuan in the so-called CNH market, where the currency can be traded against the dollar. The onshore CNY market was also liberalized, albeit to a much more limited extent, with the CNY/dollar exchange rate remaining under the control of the Chinese central bank….“more:”