Fed turmoil is threatening dollar supremacy just as China pushes the Yuan
Subscribe to enjoy similar stories. SINGAPORE—One potential beneficiary of the tug of war over the Federal Reserve’s independence: China. The criminal investigation into Fed Chair Jerome Powell is being viewed globally as an effort by the Trump administration to wrest control of monetary policy from the central bank.
That, according to some economists, risks damaging investor confidence in the U.S. financial system and the dollar, just as China is expanding use of its own currency around the world. “The institutional setup of the U.S.—through actions like those against the Fed—is being undermined," said Bert Hofman, a former World Bank country director for China now teaching at National University of Singapore.
“Holding dollars becomes a relatively less attractive proposition as a form of safety." China’s push to globalize its own currency—recently given renewed importance by Beijing in a five-year policy plan—has already alarmed officials in Washington. Before entering office, President Trump warned about China’s push to globalize the yuan and has since threatened tariffs on the Brics bloc of emerging-market countries—which includes China—should they create an alternative to the dollar. Wider use of the yuan could also allow adversaries to avoid the scrutiny of the dollar-based financial system.
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