Loading ...SPECIAL REPORT 3-27-2018
by Michael J. Kosares, USAGOLD
“China’s launch on Monday of its crude futures exchange will improve the clout of the yuan in financial markets and could threaten the international primacy of the dollar, argues a new report by Hayden Briscoe, APAC head of fixed income at UBS Asset Management. ‘This is the single biggest change in capital markets, maybe of all time,’ Briscoe said in a follow-up telephone interview.” – Kate Duguid, Reuters, 3-26-2018
Let’s just assume for a moment that an oil contract denominated and settled in Chinese yuan for whatever reasons becomes more attractive to oil traders than one denominated and settled in U.S. dollars. To the degree that decision is shared among market participants, demand will lessen for dollars and increase for yuan – strengthening one and weakening the other. Instead of all oil purchases being routed through the dollar, some level of the international oil trade will be routed through the yuan, including among American companies. “This,” says UBS’ Hayden Briscoe, “helps cement the exchange’s viability and challenges the petro-dollar system, in which oil deals are executed in dollars. This would decrease demand for the greenback and boost U.S. inflation