Yuan jumps after report Saudis considering its use in oil deals
IMAGE CREDIT: vBEIJING — China and Saudi Arabia agreed Thursday to further boost financial cooperation. Image taken from China Daily.
Mar 16, 2022: According to a Bloomberg report, the Chinese yuan reversed earlier declines and jumped toward its highs of the day following a report by Dow Jones that Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in the currency.
The offshore yuan climbed as much as 0.1% to 6.3867 per dollar, close to the session peak it reached during Asian trading. The currency had weakened as much as 0.3% in U.S. trading before the report on Saudi Arabia.
While the US dollar is the largest currency of exchange, especially in world trade and oil markets, other currencies such as the renminbi – also known as the Chinese currency – are advancing in cross-border transactions.
The outbreak of the Ukraine war and subsequent sanctions on Russia have raised questions about the alternatives to markets based on the US currency, and the yuan is a major focus in light of China’s relations with Russia. Meanwhile, Saudi Arabia’s relations with the United States have deteriorated over a range of issues, from the Yemeni civil war to possible talks on Iran’s nuclear program.
The rise for the yuan comes at a time when Chinese assets are under more widespread pressure. Amid a decline in the country’s stock, the renminbi has come under tremendous selling pressure over the past two days. The offshore yuan fell more than 1.1 percent against the dollar in the three days since March 14, the worst one-year decline.
There was no indication from the Dow Jones report on the likelihood of Saudi Arabia making such a switch nor how much of its sales might be denominated in yuan if it were to change.
It does, however, signal that the conversation around alternatives to the greenback is very much a live debate.
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