The Yuan’s Rise: Still a Long Road to Dollar Competition

Still a long way from real dollar competition
A key driver for the growing use of the yuan internationally is the sharp rise in US interest rates, which makes dollar loans expensive. The US Federal Reserve has increased its key interest rate from close to zero to a range of 5.25 to 5.50 percent since the beginning of 2022 in order to combat inflation. As a result of the dollar’s “increasingly high borrowing costs, many borrowers have turned to the renminbi (the official name of the currency, editor’s note) to finance or refinance,” said Haoxin Mu, an economist at investment bank Natixis. But the yuan is still a long way from challenging the dominance of the dollar, explained his Natixis colleague Alicia Garcia Herrero.