The Yuan can become the third largest reserve currency in the world, according to Morgan Stanley

The American financial multinational, Morgan Stanley, predicts the future of the Yuan, stating that in 10 years the Chinese Yuan could become one of the strongest currencies in the world.

The competition between the most relevant currencies of the world became tense with the beginning of the pandemic and the crisis of the coronavirus. Since, analysts never thought they would have to face such a scenario.

Now the future panorama changed in the face of a global inflection, where the economies of the power countries are in situations of critical economic recession.

Thus, the question that stands out is, which economy will manage to recover from the others? For Morgan Stanley, the future of the yuan is clear.

Goldman Sachs predicts rise of the Chinese yuan

Morgan Stanley’s prediction for the future of the Chinese Yuan
Morgan Stanley analysts issued a projection, where they considered that in the future the Chinese yuan will represent between 5% and 10% of the world’s currency reserve assets by 2030.

This is based on the premise that greater foreign investment in Chinese markets could boost the use of the yuan. Pushing it to become the world’s third largest reserve currency.

Positioning it this way, only behind the U.S. dollar and the euro, the analysts of the financial multinational said this Friday in an interview with CNBC.

In addition, they assured in a closer prediction that the yuan will probably strengthen to 6.6 yuan against the US dollar. This will be by the end of 2021. Thanks to the rapid economic recovery that China has achieved, compared to the slow pace of the United States.

The Chinese government has been trying for some time to promote the international use of the yuan, also known as renminbi (RMB). Analysts are taking this factor into account for future investments in the Chinese currency.

Well, the Chinese government has increased its efforts to allow more foreign financial institutions to enter the domestic market of the Asian giant.

It is important to keep in mind that foreign investors have also increasingly turned to the Chinese market. This in search of the potential for relatively higher returns than those of other regions. This provides the basis for the future of the yuan to be as predicted.

Can the Yuan displace the Dollar as a refuge?

The internationalization of the Chinese currency
In the past, China’s economic policy focused on preventing private and foreign Immediate Edge financial institutions from entering the country. The mission of the Asian giant was to promote its currency from the local area.

However, this vision has changed in the last 9 months. Now, with these investments, more global assets will be held in Yuan, gaining international traction and positive returns for the future of the Yuan.

″El target of 5% to 10% is not unrealistic in light of the opening of the financial market in China. As an increasing proportion of China’s cross-border transactions are denominated in RMB, this target is enhanced,“ said James Lord, international strategist at Morgan Stanley. „All of this suggests that the world’s central banks will need to keep more RMBs as part of their reserves.