Rabobank's report discusses the strengthening of the Chinese Renminbi (CNY) against the Dollar, driven by China's efforts to internationalize its currency. The report notes Xi Jinping's ambitions for the CNY to become a global reserve currency and the implications this has for the Dollar's status. Analysts highlight the challenges China faces in achieving this goal amidst ongoing trade surpluses.

CNY gains traction in global markets

"The renminbi has been steadily strengthening against the dollar since Liberation Day last year, and the PBOC has accelerated its run stronger daily fixings from late November onwards."

"Xi was clear at the Shanghai Cooperation Organization summit last year that he wished to internationalize the role of the CNY and China has begun using its monopsony market power in commodities like iron ore to drive wider acceptance of its currency for trade settlement."

"CNY is starting from a low base and still faces the Triffin Dilemma of not meeting the requirements of a reserve currency so long as China insists on running trade surpluses."

"Though it still seems unlikely at this stage, if the reserve status of the dollar was genuinely threatened it would dramatically reduce the freedom to manoeuvre of US policymakers grappling with that 'unsustainable' fiscal trajectory."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)