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This policy brief presents a new comprehensive dataset on the currency compositions of international reserves of 64 economies from 1996 to 2023. The dataset contains country-specific shares in international reserves for the eight major international currencies, i.e. the United States Dollar (USD), the Euro (EUR), the Japanese Yen (JPY), the British Pound (GBP), the Canadian Dollar (CAD), the Australian Dollar (AUD), the Chinese Yuan or Renminbi (CNY), and the Swiss Franc (CHF). The dataset provides an up-to-date and comprehensive account of publicly available data on the denomination of international reserves, including data on international currencies other than the USD, EUR, JPY, and GBP. While the USD and the EUR remain the dominant global reserve currencies, the data indicate their significance has diminished as countries diversify their reserves. Currencies, including the CNY, have gained prominence, hinting at a gradual fragmentation of the international monetary system. While the USD should retain its leading role in the medium term, ongoing geoeconomic shifts suggest a move towards a multipolar reserve currency landscape. The eventual look of this landscape will depend on the credibility of reserve currency candidates and their ability to retain the characteristics that make them desirable as reserve currencies in the face of future economic and political developments. [ABSTRACT FROM AUTHOR]

The UN's Sustainable Development Goals (SDGs) highlight the role of debt sustainability in achieving sustainable development. China's Belt and Road Initiative (BRI) is an international cooperation effort that is endorsed by over 150 countries and organizations. Given the alignment between BRI development goals and the SDGs, the issue of debt sustainability in BRI countries warrants attention. While existing studies focus on sovereign risk in debt sustainability, there is a lack of emphasis on currency risk, indicating a need for further investigation to mitigate risks and comprehensively evaluate debt stability. Using data from 142 countries, this study examines currency risk reduction in BRI countries by assessing currency competitiveness. We find that the US dollar (USD) is the most competitive currency among BRI countries, followed by the Euro (EUR), Chinese yuan (CNY), sterling pound (GBP), and Japanese yen (JPY). The USD maintains its competitive edge over time, making it the preferred choice, with the EUR as a less optimal option and the CNY showing potential. Geographically, the EUR's close ties with BRI countries lend it prominence, followed by the USD, with the CNY gaining traction. GBP and JPY are considered conservative choices. Recommendations for currency selection vary based on countries' competitiveness, bilateral relationships, and development status. [ABSTRACT FROM AUTHOR]

This paper aims to explore the relation between international competitiveness and currency internationalization by employing an analytical framework and applying it to RMB internationalization. Our results reaffirm that economic size, financial market development and network externalities are keys in currency internationalization. We also find that international competitiveness is a potential determinant of currency internationalization. However, a more comprehensively and fully measured index of international competitiveness than the GCI is needed to investigate the potential relation between international competitiveness and currency internationalization. The RMB could become an international reserve currency that is larger than the Japanese yen and the British pound sterling, but still lags far behind the US dollar and the euro by 2035. Given the network externalities and historical experience of currency internationalization, however, it will be a long and bumpy process for the RMB to become an international currency, particularly an international reserve currency. Exploring the relation between international competitiveness and currency internationalization; Reaffirming economic size, financial market development and network externalities as keys in currency internationalization; International competitiveness is a potential determinant of currency internationalization; The RMB could become an international reserve currency by 2035; RMB internationalization will be a long and bumpy process. [ABSTRACT FROM AUTHOR]

This paper provides an alternative method to estimate the degree of RMB internationalization by combining the modified Frankel-Wei’s (1994, 2008) weight-inference technique and the state space model. Using a large sample of monthly exchange rate data of 54 economies, we estimate the dynamic currency weights of the U.S. dollar, Euro, RMB, Japanese yen and British pound. Results show that RMB has markedly increased since August 2015 as an international anchor currency, and then gradually decreased from June 2016 to December 2018. The currency weights ranked from highest to lowest are the U.S. dollar, Euro, RMB, British pound and Japanese yen for now. Furthermore, we also find that relative trade openness, capital account openness and exchange rate stability are the key drivers promoting the weight of the RMB. The above findings are robust to a battery of robustness tests. Our research contributes to the literature by providing a dynamic anchor currency weight estimation method and presenting a preliminary explanation for the changes of currency weight. [ABSTRACT FROM AUTHOR]

This study examined the capabilities of six cryptocurrencies as a hedge and safe haven against the stock indices and foreign exchange rate in the East Asia-5 markets. According, MGARCH-DCC was adopted and implemented in data collection processes together with Rathner and Chiu regression method, which spanned from April 2013 to December 2019. The results revealed that these cryptocurrencies had dissimilar hedging and safe haven capabilities across various stock indices and exchange rates in the East Asia-5 markets. In particular, Bitcoin, Litecoin, and Ethereum offered strong hedge properties on most of the East Asia-5 equity indices. Moreover, Bitcoin and Litecoin only provided a safe haven for Japanese Yen currency, while Taiwanese equity indices and Chinese Yuan currency can be safely protected via an investment into Stellar. [ABSTRACT FROM AUTHOR]

This article highlights the increasingly important role of clean energy metals in return and volatility spillovers across energy and foreign exchange markets. During the collapse of oil prices from 2014 to 2016, crude oil futures were at the center of the risk contagion; however, since the COVID‐19 pandemic broke out, the spillovers of clean energy metal futures have become one of the main sources of the risk contagion. Additionally, crude oil and the US dollar are the most important contributors to the spillovers, but further spillovers are emerging between the Chinese yuan, euro, and Japanese yen with clean energy metals. [ABSTRACT FROM AUTHOR]

This study sets out to explore the impacts of the Russian-Ukrainian conflict on worldwide financial markets by considering a large array of national currencies, precious metals and fuel, agricultural commodities and cryptocurrencies. Estimations span the period since the Russian invasion until the takeover of the Ukrainian city of Mariupol. Optimal portfolios are constructed for separate categories of financial assets for different levels of risk-aversion by investors. The Chinese yuan, gold, corn, soybeans, sugar and Bitcoin prove to be safe haven investments while the Japanese yen, natural gas, wheat and the combination of Bitcoin and Ethereum offer profit opportunities for risk-seekers. Notably, the agricultural commodities' portfolio is the best performing while the cryptocurrency portfolio generates the worst risk-return trade-off. National currencies could act as safe havens in the place of gold when all types of assets can be combined. Natural gas is revealed to be the most reliable profit generator. Overall, high risk appetite does not result in large improvement in portfolios' returns. This study sheds light on investors' optimal decision-making during elevated geopolitical uncertainties and provides a compass for improving welfare. [ABSTRACT FROM AUTHOR]

The aim of this study is to examine the dynamic relationship between Bitcoin and major foreign exchange rates namely Euro, British Pound, Canadian Dollar, Japanese Yen, and Chinese Yuan. In this context, we employ the causalityin- mean and variance test suggested by Hong (2001) to examine the presence of mean and volatility spillover effects between Bitcoin and foreign exchange rates. Also, we use the causality-in-risks test proposed by Hong et al. (2009) to investigate the existence of tail dependence between Bitcoin and foreign exchange rates. By using daily data from August 19, 2011, through August 6, 2021, we find unidirectional Granger causality-in-mean from Euro, Pound, and Dollar to Bitcoin. On the other hand, causality-in-variance test results suggest a bidirectional volatility spillover effect between Bitcoin and Euro and Pound. Also, Yuan and Dollar are found to be Granger cause-in-variance of Bitcoin. Causality-in-risk test results provide evidence in favor of causal link running from Euro and Pound to Bitcoin. In addition, unexpected losses in Bitcoin are the Granger cause of unexpected losses in the Yen. Overall, our empirical analysis results show that the Chinese currency market seems to be less integrated with Bitcoin. [ABSTRACT FROM AUTHOR]

This study proposes a unified financial condition index centred around the most popular financial conditions indices used in the US and tests its relationship with the most actively traded USD based foreign currency pairs, namely the British pounds, Japanese yen, Australian dollar, Canadian dollar, Chinese yuan and the Indian rupee. Using weekly data over 1993-2018, this paper proposes a Unified Financial Condition Index (UFCI) under a principal component analysis framework. The index captures 78% of the variability inherent in St Louis Federal Reserve Financial Stress Index, the Chicago Fed National Financial Condition Index and the Adjusted National Financial Condition Index. Significant p-value of UFCI, homoscedasticity and a relatively stable root mean squared errors were observed only for EUR/USD. Mixed findings, found as lags, were increased, suggesting a weak relationship between UFCI and foreign currencies. The UFCI forecasting model is compared with the VIX (volatility index) based model, and also a random walk model. Although the UFCI model was superior only for the Canadian dollar, Chinese yuan and Indian rupee after considering heteroscedasticity in errors, results were sensitive to the number of lags and insignificant p-values. [ABSTRACT FROM AUTHOR]

This paper investigates how safe (or risky) the Chinese renminbi is as an international currency from the perspectives of dollar‐ and euro‐based investors. It estimates the "safehavenness" of the currency, defined as the extent to which the currency plays the role of a safe haven, in both its onshore and offshore markets alongside 20 most‐traded currencies in the world, including those in the special drawings rights (SDR) basket. We find that the Chinese renminbi has generally registered a high level of safehavenness among the most‐traded currencies since it became actively traded in the offshore market. Compared with the other SDR currencies, it consistently ranks below the Japanese yen and U.S. dollar but above the British pound and euro on the scale of safehavenness. Despite market fragmentation, the safehavenness of the Chinese renminbi onshore (CNY) is very similar to, albeit marginally lower, that of the Chinese renminbi offshore (CNH), attributable possibly to a stronger price discovery process in the latter market. These estimation results show striking consistency between dollar‐ and euro‐based investors in their assessment across various time periods characterized by major structural differences. [ABSTRACT FROM AUTHOR]

The structure of the nominal exchange rates in South Africa is examined by using fractional integration. We investigate the levels and the volatilities against the US dollar, the British pound, the Euro, the Japanese yen, the Chinese yuan, the Australian dollar, and the Botswanan pula. The results indicate that most series are unit root, I(1) and though there is some evidence of mean reversion, the orders of integration are close to 1, implying high levels of persistence. However, there is evidence of mean reversion for Bostwana Pula in various subsamples. For the volatilities, the stationary long memory is observed in all cases. [ABSTRACT FROM AUTHOR]

By linking measures of forecast accuracy as well as testing procedures with regard to forecast rationality this paper investigates aggregated survey forecasts with forecast horizons of 3, 12, and 24 months for the exchange rates of the Chinese yuan, the Hong Kong dollar, the Japanese yen, and the Singapore dollar vis-à-vis the US dollar and, hence, for four different currency regimes. The rationality of the exchange rate predictions is initially assessed utilizing tests for unbiasedness and efficiency which indicate that the investigated forecasts are irrational in the sense that the predictions are biased. As onemajor contribution of this paper, it is subsequently shown that these results are not consistent with an alternative, less restrictive, measure of rationality. Investigating the order of integration of the time series aswell as cointegrating relationships, this empirical evidence supports the conclusion that the majority of forecasts are in fact rational. Regarding forerunning properties of the predictions, the results are rather mediocre, with shorter term forecasts for the tightly managed USD/CNY FX regime being one exception. As one additional important and novel evaluation result, it can be concluded, that the currency regime matters for the quality of exchange rate forecasts. [ABSTRACT FROM AUTHOR]

Foreign exchange trading has long been concentrated in the financial centers as London, New York and Tokyo, but as major western markets face up with structural and macroeconomic challenges, especially with the latest world financial crises from 2007, turnover is beginning to shift to Singapore, Hong Kong and Shanghai, on the Asian markets. Many emerging market currencies in Asia showing strong fundamentals for growth, and some of the region's financial centers taking a more pragmatic approach to regulation, the region offers attractive opportunities for foreign exchange practitioners. In this paper, we have done a more detailed analysis of the Asian foreign exchange centers, as Singapore, Hong Kong, China and Japan. The movement of their currencies and turnovers shows higher growth rates than the currencies of other regions after 2010, particularly true for The Japanese yen, the Chinese yuan, Singaporee's foreign exchange market, the largest market in Asia, Hong Kong, the largest financial centers in the world for high market performance and justify their growing importance in the global foreign exchange market. [ABSTRACT FROM AUTHOR]

The article focuses on internationalization of the Chinese yuan and its effect on Japanese overseas subsidiaries as Japanese overseas firms use yuan in their trade transactions and argues that Chinese government is increasing cross border transactions with this and yuan related deposits, bonds, and derivatives in offshore markets have been expanding. It also discusses difference in internationalization between Yen and Yuan, and problems in use of respective currencies for trade invoicing.

The article focuses on the data regarding currency basket of China's Yuan renminbi (RMB) which covers several monetary units including Japanese yen (JPY), Euro (EUR), and the U.S. Dollar (USD). It cites tables that show the descriptive statistics for exchange rates' log-differences, results for unit root and stationary tests, and cointegration test. It states that the data was gathered using the augmented Dickey-Fuller (ADF), Kwiatkowski Phillips Schmidt Shin (KPSS), and Johansen test.

The volatility of RMB exchange rate is always the focus of academic discussion. This paper selected 826 high-frequency exchange rate data after the rate system reform, based on the calculation of U.S. dollars and HK on RMB exchange rate fluctuations by GARCH (1, 1) model, and studied the interaction among U.S. dollar, Hong Kong dollar, Japanese yen and euro on RMB exchange rate. Accordingly, it is suggested that the volatility in the continuity of HK on RMB exchange rate is stronger than U.S. dollar on RMB exchange rate, in the foreign exchange market in China, U.S. dollar and HK are the strongest, euro followed, and yen is the weakest. [ABSTRACT FROM AUTHOR]

The exchange-rate behavior of the Chinese yuan (RMB) and the Malaysian ringgit (MYR) indicates that the real exchange rate volatility of both the pegged currency/the anchor currency (the US dollar), and the pegged currency/the non-anchor currencies (Japanese yen and British pound) are lower under the pegged regime. The dynamic behavior of the pegged currencies' real exchange rates is consistent with the anchor currency as the speed of convergence of the Big Mac real exchange rates of the RMB, MYR, and the dollar against the floating currencies are almost identical during the pegged period. This may be due to similar inflation rate movements in the related economies. These results do not support the opinion that China has manipulated the value of its currency. [ABSTRACT FROM AUTHOR]

The article analyzes why the U.S. dollar will remain as the widely held foreign international reserve. It mentions that the Swiss franc and British pound do not have the circulation size, while the Chinese renminbi and the Japanese yen do not have the government support, leaving the euro as the competitor against the dollar. It adds that the economic and financial troubles in some European Union members and pressures on the European Central Bank (ECB) will not see the dollar disappearing from the international stage soon.