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As the world boldly shifts from the dollar, India is still taking baby steps in this direction – but good steps still
Currency wars are not new but the legitimacy of adopting alternative currencies to replace the dollar by major economic power houses has been fortified during the 2009 credit crunch. This has given an opportunity to nations who want to strengthen their currency as the best alternative.
China has been doing the same for years to strengthen its currency in the global market. It is in consultation with neighbouring countries to trade in domestic currencies. Yuan reserves in Hong Kong have increased to 200 billion between December 2009 & November 2010. China has been negotiating with South Korea, Malaysia, Belarus, Indonesia, Argentina, Iceland and Singapore for bilateral currency swap agreements since 2008 and later with Hong Kong, New Zealand and Uzbekistan. The currency swap is currently valued at RMB 829.2 billion (about $127 billion). Apart from currency swap, China had given licenses to 67,000 exporters in its 20 provinces to issue invoices in Yuan by 2010. However, China is not alone. Around 85% of Iran’s oil exports take place in other currencies as of 2007 and it has plans to undertake around 15% trade in other currencies like the dirham. Even Russian PM Putin has renounced the dollar and promised to carry out bilateral trades via domestic currencies with China in 2010. Hugo Chavez of Venezuela is one better, and follows the old barter system. Nigeria, one of the largest energy exporters, refused to use the dollar after some US-imposed sanctions.
India’s FM has given the green signal to Indian corporate houses to borrow funds from Chinese banks up to $1 billion in the Chinese renminbi. It is a step late in time, and India may have missed much of the initial hype; but it’s still not too delayed. This is a good time to test out the worth and potential of trade in other currencies.
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