Global expert confirms the growing Chinese yuan in the Gulf economies

Global expert confirms the growing Chinese yuan in the Gulf economies

History: May 7, 2015

Source: Dubai statement

Confirmed expert in the currency markets of Bank «Credit Agricole private eye bank», in the context of the intervention conducted through informational table a round organized by the Bank in its offices in Dubai, the Gulf Cooperation Council (GCC) will experience significant growth in the volume of dealings Chinese yuan, to meet the needs of commercial and investment transactions growing between China and the GCC states and other Middle East countries.

Said Davis Hall, global head of department of foreign currencies and precious metals consulting the bank in the context of his speech: «the largest trading partner of the Gulf Cooperation Council as, observers believe that China will play an increasingly important role in the region’s economy in general, particularly activities related to trade in basic and investment goods joint projects of infrastructure in particular. China also used the region in general and the UAE in particular, as a regional hub strategy to deal with the countries of Africa and the Middle East. In light of this background, we can say that China is increasingly turning to Her main interest in the Gulf Cooperation Council (GCC) region’s economy. In order to promote cross-border transactions format, will result in the adoption of local and regional companies to handle Chinese yuan to strengthen trade and investment relations between China and the GCC states even more. »

It is noteworthy that China has become over the past few decades, one of the largest consumers of industrial goods in the world, and reached its consumption of those goods 46% of global consumption. This development coincides with the imminent vote members of the International Monetary Fund in November 2015 on the possibility of adopting the Chinese yuan as an international reserve currency. If approved by the International Monetary Fund to adopt the Chinese yuan international reserve currency, it excels prices cashed the currencies of the Gulf Cooperation Council (GCC) exchange rate over time prices, as has been shrinking continuously status, which has long enjoyed by the dollar over the past few decades as a safe haven and international reserve currency favorite.

And the gradual internationalization inevitable

He continued Davis Hall: «will inevitably attracts and the gradual internationalization of the Chinese yuan continuously various types of investors to the alternative parallel international reserve currencies. Many countries and recognize the existence of this possibility, and began to assess the platforms necessary to deal to take full advantage of the existing trade relations and future alike. Remarkably, in this context, that Qatar established the first offshore center for the Chinese yuan clearing in the region, to facilitate the development of trade and economic relations between China and the Gulf Cooperation Council ».

The use of the Gulf Cooperation Council (GCC) economies that depend on export earnings from hydrocarbon products currently greater than the dollar by use of the Chinese yuan, due to link currencies of those countries exchange rates dollar exchange rates as a reserve currency for international oil trade certified. This linkage between revenues and lead those countries from the export of oil and gas between the dollar and to retaining most of their foreign exchange reserves in dollars. Among the most prominent other aspects of the subject, that the Chinese yuan is not fully exchangeable currency after, what may limit its appeal as the currency of international reserves in the central banks of view.

Rate of exchange

He explained Davis Hall, saying: «the current situation may develop in conjunction with the rapid growth of the volume of oil and non-oil trade between China and the Gulf Cooperation Council. With the recent trends in oil prices, we can say that the evolution of a single commodity prices never affect directly in foreign exchange markets to the extent that we see now. And the traumatic effects brought about the decision of the Organization of Petroleum Exporting protect its market share and to maintain high production levels in the month of November last year, waves equations exchange rates significantly changed in the FX markets. This has resulted in polarization centered around oil output to foreign exchange markets from winter slumber and restore its activity in the currency pricing.

The most unwanted side effects by this development in the restoration of the dollar exchange rate for its locomotive with Gulf currency exchange rates ». He continued, resulting in this critical situation and the impact of anti-inflation scenario «low oil prices and the strong dollar» to fully re-shuffle of papers. And in this context it emerged winners and losers as a result of easing central banks since the beginning of this year gradually the restrictions that were imposed by monetary policy.

Scenario of oil prices

He said Davis Hall, saying: «scenario imposes low oil prices and the dollar bullish great pressure on OPEC as it prepares for the meeting next month. As most of the economies of the Gulf Cooperation Council (GCC), which peg their currencies to the dollar will have on OPEC to study the level of private produced its strategic decision very carefully in view of the critical importance for the countries in the region. It must also take into account the possible detente with Iran, which has also ravaged oil prices due to the impact in the current fragile equation of supply and demand. »

In addition, this scenario is another important element to link the currencies of the Gulf Cooperation Council (GCC) exchange rates and the dollar is the adoption of the US Federal Reserve Bank’s policy to normalize interest rates soon to counter the continuing rise in the dollar exchange rates. As it is the first time since 1989, higher than the dollar and the currencies of countries associated with the performance of currencies such as the Gulf Cooperation Council (GCC) on the performance of alternative currencies for all countries in the Group of Twenty (G 20). Finally emerged concrete consequences for this stage of the rising dollar exchange rates, which will affect the timing and scope of decisions that will be taken by the Commission on the open market in the US Federal Reserve meeting and the inevitability of entering the stage of «normalization» interest rates.

The balance of risks

Davis Hall and concluded by saying: «We believe that the balance of risks and benefits is taking less and less tilted in favor of the dollar, away from excessive obsession with the possibility of the existence of a large exit from the dollar. Over time, some of the key global currency alternative to the dollar will regain strength exchange rates and surprised by the end of this year a new reality differs from individual dominance of the US dollar during 2014. »

Earnings

Showed consolidated business results of the Bank of Credit Agricole Egypt, said yesterday that net profit jumped 59.9% in the first quarter of 2015 with the growth of interest income.

The net profit compound 236.171 million pounds (30.95 million dollars) in the three months to March 31, compared to 147.612 million a year ago. Bank revenues and benefits increased 18.6% to $ 650.94 million from 548.645 million pounds a year ago. The financial position of the Bank data revealed that the total deposits increased 4.6% to 27.805 billion pounds from 26.588 billion pounds a year ago. Total loans rose 6.6% to 14.027 billion pounds from 13.165 billion pounds in the first quarter of 2014.

The capital of the Bank 1.148 billion pounds, divided into 287 million shares with a nominal value of four pounds per share. Cairo Reuters

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