Redefining the G-3: Welcome to the Chinese renminbi
For over a decade, any foreign-exchange watcher mentioning the "G-3" would be referring to the U.S. dollar, the euro and the Japanese yen. Together, these three currencies accounted for more than 70% of all currency transactions in recent years. We would argue, however, that the G-3 is structurally changing. In this paper, we explore why China merits having a place among the G-3. Specifically, this paper will explore:
- How China is redefining the G-3. Even with its closed capital account, China and its currency, the renminbi, are exerting a greater influence than the yen on global markets on multiple fronts.
- What are the factors driving the widening divergence between the old and the "new" G-3 currencies?
- How will the new G-3 currencies interact with other asset classes and what roles can they play in portfolios?
- What are the drivers behind currency markets? We take a closer look at long-term valuations and shifts in the countries' respective balance of payments.
Redefining the G-3: Welcome to the Chinese renminbi (PDF)
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