Since June, the U.S. dollar has been unbeatable… It has beaten every major currency, except one.
Specifically, the U.S. dollar has outperformed 30 out of the 31 major world currencies in that time.
But what is the one currency that is stronger than the dollar? Which country is beating the U.S. now?
China…
You may be surprised to hear it, but earlier this year, according to the International Monetary Fund (IMF), China surpassed the U.S. as the world’s largest economy (on a “purchasing power” basis).
[ad#Google Adsense 336×280-IA]It’s the first time in 142 years that the U.S. hasn’t been on top.
(Technically, the U.S. economy is still larger than China’s on a “nominal” basis, but the trend is still in place for China to overtake the U.S. there, too.)
In short, China is on its way to becoming a global superpower.
But it is not there yet…
The U.S. is the superpower today. More than 80% of the currency reserves that countries hold are held in U.S. dollars and euros.
Right now, when it comes to global currency reserves, China’s currency basically has no “market share.”
The thing is, as China’s currency becomes more “in demand” as a reserve currency – the more it gains market share – the more it will go up in value.
You might be surprised to learn this… but China’s currency already has been going up… for years…
China’s currency has appreciated steadily versus the U.S. dollar for the past decade, as the table below shows.
China’s currency has gone up by an average of 3% a year over the past decade. The most it went up was 7%, back in 2008. And it has only fallen in one year – this year. It’s down by 1.1% this year.
As you may know, I’ve been talking a lot about the opportunity in Chinese stocks lately…
When you’re in the stock market, you’re also exposed to China’s currency. I think this is a good thing…
I expect China’s currency to continue to appreciate in value. China pays higher rates of interest than most countries, and yet it has a higher credit rating than most countries. Money flows to where it’s treated best – and investors like high interest rates combined with a high credit rating. Money will keep flowing to China.
The next time you want to diversify some of your money, consider putting some into China’s currency, as opposed to the euro or the Japanese yen. The simplest way I know of to basically hold China’s currency in a U.S. bank account is through Everbank, right here.
Good investing,
Steve
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Source: Daily Wealth