The yuan made up a record share of the world’s foreign exchange reserves in the first quarter of this year, according to data from the International Monetary Fund (IMF).
Some 2.45% of the reserves were held in the Chinese currency at the end of the first quarter, the IMF data showed Wednesday, as foreign investors viewed the yuan as a safe-haven currency amid the Covid-19 pandemic.
The latest figure marked the fifth straight quarter in which the yuan’s share of global forex reserves grew, up from 2.27% in the fourth quarter of last year and 1.08% in the fourth quarter of 2016, when the IMF started tracking the yuan, the data showed.
The global market has taken to the yuan due to its perceived status as a safe-haven asset against volatility, a foreign exchange market analyst said. The Chinese economy has rapidly recovered from the pandemic while many other countries continue to grapple with it. The yuan has also grown in influence in international trade because of China’s cemented position as a global manufacturing powerhouse amid the pandemic.
Expectations for a weaker U.S. dollar also led foreign investors to increase their holdings of yuan assets in the first half this year, the analyst said. In May, the yuan strengthened to a fresh three-year high against the dollar, though Chinese policymakers later took measures to curb the currency’s strength.
In addition, the yuan’s increasing share of overseas forex reserves shows that Beijing is making some progress in its efforts to internationalize the yuan, though the currency still makes up just a fraction of the global market.
At the end of March, the yuan’s share of global forex reserves was the fifth largest, behind the U.S. dollar, with 59.54%, the euro, with 20.57%, the yen with 5.89%, and the British pound, with 4.7%, the IMF data showed.
Contact reporter Tang Ziyi ([email protected]) and editor Michael Bellart ([email protected])
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