Days of ‘Dollar’s dominance are counted now
This comes days after China and Russia decided to renounce the US dollar and resort to using their own currencies for bilateral trade.
“About trade settlement, we have decided to use our own currencies,” China Daily quoted Russian Premier Vladimir Putin as saying in a joint news conference with his Chinese counterpart Wen Jiabao in St. Petersburg on Tuesday.
The developments come as the two countries are accustomed to using the dollar and other Western currencies for bilateral trade. But the yuan has now started trading against the Russian ruble in the Chinese interbank market.
China has also announced it will continue to allow more currencies to trade in the domestic interbank foreign-exchange market in the coming weeks.
In addition, BusinessWeek has said in a recent report that Moscow and Beijing have also called for the dollar’s role in the financial system to be diluted.
The decision comes days after China blasted a US decision to inject hundreds of billions of dollars into the US banking system.
Chinese Vice Finance Minister Zhu Guangyao said Washington was ignoring its responsibility to support emerging economies.
“The US has not fully taken into consideration the shock of excessive capital flows to the financial stability of emerging markets,” Zhu told reporters in Beijing in early November.
The US Federal Reserve has announced plans to pump USD 600 billion into its economy by the end of June 2011.
This is while China has continued to resist pressures from the US to raise the value of its yuan currency against the US dollar. Senior officials in Beijing say China will firmly stick to its own path for reforming the yuan.
The currency debate has intensified tension between the US and China. Washington says China holds the yuan low so that Chinese goods can enjoy an artificial competitive edge.
Relations between Beijing and Washington have been deteriorating over a number of issues, including the Pentagon arms sales to Taiwan.