November 10, 2014
It’s happening. With increasing speed and frequency.
The People’s Bank of China and the Canadian Prime Minister’s office issued a statement on Saturday stating that Canada will establish North America’s first offshore renminbi trading center in Toronto.
China and Canada agreed on a number of measures to increase the use of renminbi in trade, business, and investment. And they further signed a 200-billion renminbi bilateral currency swap agreement.
Moreover, just today, hot off the presses, the central banks of China and Malaysia announced the establishment of renminbi clearing arrangements in Kuala Lumpur, which will further increase the use of renminbi in South-East Asia.
This comes just two weeks after Asia’s leading financial center, Singapore, became a major renminbi hub, with direct convertibility established between the Singapore dollar and the renminbi.
Everyone is in on the trend. All across the world, the renminbi is quickly becoming THE currency for trade, investment, and even savings.
Renminbi deposits in South Korea, for example, surged 55-times in one single year. It’s stunning.
The government of UK just issued a renminbi bond, becoming the first foreign government to issue debt in renminbi.
Even the European Central bank is debating to include renminbi in its official reserves, while politicians the world over are sounding not-so-subtle warnings that a new non-dollar monetary system is needed.
Nothing goes up or down in a straight line. And given how volatile Europe and the global economy continue to be, the dollar may certainly be in for its surges and bumps in the coming months.
But over the long-term it’s glaringly obvious where this trend is going: the rest of the world no longer wants to rely on the US dollar, and they’re making it a reality whether the US likes it or not.
Right now there’s still time to buckle up. If you’re 100% exposed to the US dollar, consider diversifying your investments in real assets, or a currency like the Hong Kong dollar.
Hong Kong dollar is pegged to the US dollar. So if the US dollar surges, the Hong Kong dollar will strengthen accordingly. And because the peg is so tight, the currency volatility is minimal.
But if the US dollar takes a turn for the worse, Hong Kong would likely abandon this peg, thus eliminating your downside risk.
This is a very strong option to consider.