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Why you should pay attention to the currency that's kicked the US dollar off its top spot

by , 12 December 2014

There's no denying the dollar's had a terrific rally since June. It's hammered the rand along with a whole host of other currencies.

Yet there's one currency that it hasn't beaten. There's one currency that's now stronger than the dollar.

So what currency is this? And what should you do about it?

Let's take a closer look…

China’s currency is gaining traction

The International Monetary Fund (IMF) says that China is now ahead of the US as the world’s largest economy on a purchasing power basis.

This is the first time in nearly a century-and-a-half that the US hasn’t been in this position.

On a nominal basis, the US economy is still the largest, but it doesn’t look like it will be long before China kicks the US off this top spot too.

The US is still the world’s superpower, but it’s under considerable pressure from China for the position.

At the moment, countries hold 80% of their currency reserves in dollars and euros. China’s currency isn’t popular yet.

But over time, as the demand for China’s currency rises as a reserve currency, the larger its market share will become and the more its value will rise.

This is what’s been happening for the past ten years against the US dollar. The yuan has gained 3% a year, on average, over the past decade against the greenback.

What makes China’s currency appealing to investors?

There’s a good chance that the currency in China will continue to rise in value, Dr Steve Sjuggerud in Daily Wealth explains.

China pays good interest rates, higher than many countries. And it holds a higher credit rating than many countries.

These factors attract money. And if this stays this way, the money will continue to flow to China.

If you want to diversify some of your portfolio, you should put some money into the yuan.

So there you have it. Why you should pay attention to the currency that’s kicked the US dollar off its top spot.

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Why you should pay attention to the currency that's kicked the US dollar off its top spot
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