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ALLANA MANAGEMENT JOURNAL OF RESEARCH, PUNE - Volume 1, Issue 1, January 2011 - June, 2011

Pages: 84-91
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Category: Human Resource Management


Sub-prime crisis, European debt crisis, Fed's QE2 policy… consequently many observers conjecture is once again rife that we are reaching the end of the era of dollar dependency. Evidently next question is where
will be the safe heaven? Who will give the hope against all odds ? Given the sheer size of economy and
fierce growth rate spotlight is now on Chinese Yuan. In another two decade years China is set to replace the US as
the world's largest economy. It is already the world's largest exporter and will soon also be the largest trading
nation. Contrary to the US, the world's largest debtor, China is also a large net external creditor, only trailing
Japan. A close parallelism from history in hand is that as once economically and financially ascendant Dollar has
replaced British Sterling troubled by the bequest of two world wars; would this time Redback will replace the
Greenback in similar way ? China is taking many incremental steps like more trade settlements in Yuan, Currency
Swap, and diversification of its reserves to internationalize its currency. Along the way there are challenges of
growth with right monetary policy maneuver, exchange rate stability, financial market and legal reforms which
requires considerable time in coming years. While Pound, Yen are not so strong currency given their economic and
financial size and structure but Euro is still in the race. Also technically speaking IMF SDR might be another viable
alternative. As world is becoming more multi-polar there is less conclusive possibility of actually Yuan becoming
single monopoly reserve currency like Dollar. After next 15-20 years more probable scenario is that it will become
an internationalized currency and pose as a strong contender along with Dollar and Euro for reserve currency