GO

Enter Symbols

GO

Enter Keywords

Yuan to supersede dollar as top
reserve currency: Survey

Ansuya Harjani

|

@Ansuya_H

Wednesday, 26 Feb 2014 | 10:29 PM ET

881

SHARES

COMMENTS

Join the Discussion

AMERICAS FX

ASIA-FX

EU-FX

U.S.

CURRENCIES

HOME U.S.

NEWS

MARKETS

INVESTING

TECH

SMALL BUSINESS

VIDEO

SHOWS

WATCH LIVE

PRO

REGISTER

|

SIGN IN

100

The tightly controlled

Chinese yuan

will eventually supersede the dollar as

the top international reserve currency, according to a new poll of institutional
investors.

The survey of 200 institutional investors - 100 headquartered in mainland
China and 100 outside of it - published by State Street and the Economist
Intelligence Unit on Thursday found 53 percent of investors think the renminbi
will surpass the U.S. dollar as the world's major reserve currency.

Optimism was higher within China, where 62 percent said they saw a
redback world on the horizon, compared with 43 percent outside China.

Hudiemm | E+ | Getty Images

"As China's economic influence grows, the global importance of the renminbi
will become magnified. Indeed, while for decades it has been a 'greenback
world', dominated by the U.S. dollar as the world's primary reserve currency,
many think a 'redback world', in which the renminbi enjoys premier status, is
increasingly a possibility," the report accompanying the survey said.

MORE FROM CNBC

Cramer: This stock a real bargain

Google is cutting its forgotten social network

Prince Harry about to become $17 million richer

Sex tape adds to murk of GSK China scandal

This is the hottest commodity of the future

Inflation depends largely on this factor: Fed

FOREX- Euro traders eye inflation, ECB, BNP fine

Here's Amazon's biggest problem

YOUR MONEY-What would you do with $100,000?

INSIGHT-After BNP, US targets range of firms in
crackdown on illicit money flows

Recommended by

SPONSORED

Recommended by

(Read more:

Yuan takesanother step forward as a world currency

)

This view was shared by European Central Bank Executive Board member
Yves Mersch, who said on Wednesday that China's yuan is gaining
importance in international trade and investment and might ultimately
challenge the U.S. dollar.

However, skeptics of yuan internationalization argued that the renminbi will
never be liquid enough across all asset classes to serve as a viable reserve
currency, and that people will not trust the renminbi as a store of value.

Despite being a closely-managed currency, the renminbi's global clout has
been rising steadily. By the end of 2013, the renminbi had become the
second most used trade financing currency and ninth most used currency for
payments globally.

(Read more:

Yuan overtakes euro as 2nd most used currency in trade

finance

)

Recent moves in the yuan have triggered speculation that the People's Bank
of China is getting ready to widen its trading band - which would be a step
towards liberalizing the Chinese currency. The yuan is currently allowed to
rise or fall by 1 percent in either direction from a level fixed against the dollar
each day by the country's central bank.

Ultimately, a greater role for the yuan would require China to liberalize its
financial policies, including decreasing exchange-rate intervention,
liberalizing interest rates and relaxing restrictions on capital flows.

FEATURED

Santelli: Talking about the 2-year

FX rate 'important' for price stability:
Draghi

Betting on the World Cup? Here's
Deutsche's tips

RBA trying to nudge Aussie dollar
lower: Pro

Take The Ultimate
Motorcycle Road Trip

(Allstate GoodLife)

15 Good Looking
Celebrities Who
Destroyed Themselves…

(She Budgets)

How Caffeine Affects
Your Heart

(Health Central)

11 Popular Stars Who
Died Before 35 in the
Past 20…

(Fame10)

Two-thirds of the respondents of the survey expect Beijing to complete its
financial liberalization within ten years, with a majority expecting major
reforms within five.

(Read more:

Is China getting ready to widen the yuan's band?

)

Financial liberalization in the mainland began in earnest after 2009, with the
government's decision to allow cross-border trade settlement in renminbi,
ease the process of listing offshore bonds and introduce the renminbi
qualified institutional investors (RQFII) program.

The reforms, however, are still limited in scope, with strict quotas for how
much currency can move across the border.

Last year, the government launched the Shanghai free-trade zone as a
testing ground for financial reforms, including full yuan convertibility.

—By CNBC's Ansuya Harjani. Follow her on Twitter

@Ansuya_H

Email

SIGN UP

CNBC NEWSLETTERS

Get the best of CNBC in your inbox

› Learn More

MORE FROM FX

Dollar wins out as US payrolls beat expectations

Milk got your carry trade?

Commodities tomorrow: Platinum at 10-month
high

Santelli: Major averages pop higher

Dollar seen rebounding from summer softness

Currencies: US jobs unlikely to move the needle?

Aussie dollar on a roll, but can it last?

Dollar shines on US private sector jobs report

Commodities tomorrow: Copper hits 4-month
high

Santelli: Global data

TOP NEWS & ANALYSIS ›

This will either make stock rally sizzle or snap

Study links quakes to water dumping—not fracking

World Cup overpass project collapses in Brazil

Car buyers are most loyal to these brands

American Dream is still alive, but unrecognized

PBOC is the 'market' behind yuan: Julius Baer

Wednesday, 26 February 2014 | 7:24 EST | 2:43

Mark Matthews, Head of Research Asia at Bank Julius Baer, says recent weakness in
the Chinese yuan could be a move executed by the Chinese central bank to shake out
speculators.