Renminbi Reserves?
The Dollar debasement debate hasn’t finished but should now take a breather whilst some stability has been restored to the currency. A combination of the nomination of Kevin Warsh, as we noted yesterday, as well as some robust US data are to thank for that recovery. To note here whilst on the subject, an enduring hangover from the government shutdown last year appears to be due to deprive the market of key labour market data on Friday. Non-farm payrolls data due for January will be postponed once again leaving a key statistic absent at a crucial time for the Dollar.
At a time of comparative vulnerability for Dollar valuations, publications yesterday of China’s ambitions to achieve reserve currency status came to the fore. This supposed ambition isn’t a new phenomenon and in fact despite the publication by President Xi in the communist party’s ideology journal on Saturday, the comments were actually from a speech made over a year prior. The contention from China yesterday that its Yuan might serve as a reserve currency in place of an ailing Dollar therefore reads more as an element of political timing than a contention for a viable new economic reality.
Our view is that despite value destruction always being a possibility for any currency in an open market, the Dollar’s status as a safehaven is unlikely to change anytime soon. The flows that have undermined the Dollar this year and last do not pertain to those obtained from its reserve currency status. They’re a combination of hedging flows from investors and a reflection of political and monetary risk. The market’s reaction to Kevin Warsh so far has been Dollar positive. However, the road is far from certain for a Federal Reserve Chair whose primary ambition is likely to be to limit the scope of the central bank he may be to preside over.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Bucking the trend
Charles Porter
Thu 5 Feb 2026
Bucking the trend The Aussie Dollar has broken out from recent ranges and is on a convincing upward trajectory. Post-Covid, the antipodean currencies, AUD and NZD, had found themselves a step ahead of the dominant global cycle shared between the likes of the UK, EU, and US economies. Over the past couple of years that […]
Daily Brief – A Dollar Vacuum
Charles Porter
Tue 27 Jan 2026
A Dollar Vacuum If you’ve ever heard the phrase, ‘a rising tide lifts all boats’, you already know everything you need about today’s FX market. That is provided of course you’re not trying to analyse the rising tide itself, in this case our US Dollar. The Dollar is the counter currency to most key pairs […]
Daily Brief – Secondary effects
Charles Porter
Thu 29 Jan 2026
Secondary effects Despite the Federal Reserve decision last night offering momentary relief to the Dollar, a structural shift in USD remains underway. There were two themes to the Federal Reserve’s decision last night. Firstly, the Fed presented a decision to hold based upon the resilience that the US economy is showing. Secondly, Powell staged a […]
