U.S. Dollar Gains on Chinese Announcement

China announced that it would not be making efforts to get rid of the U.S. dollar as the world's reserve currency any time soon. Indeed, China announced its support for the dollar as the world's reserve currency.

The move helped increase confidence in the greenback, and led to strength for the dollar in forex trading. Boris Schlossberg reports in FX360 about the impact the Chinese announcement is having on the greenback in currency trading:

The dollar gained broadly across the board at the start of trading this week after Chinese officials reaffirmed the reserve status of the greenback at the BIS conference at Basel over the weekend. PBOC governor Zhou Xiaochuan told reporters that China’s “foreign exchange reserve policy is always quite stable”, making a tacit acknowledgment that for the time being the Chinese do not intend to diversify out of their dollar denominated assets.

This does not mean that China's ambitions to be the next economic superpower have faded. Indeed, China continues to position the yuan through currency swaps with emerging market economies. It may be that China is getting ready to take over as the reserve currency two or three decades down the road.