China's yuan moved closer to joining other top global currencies in the International Monetary Fund's benchmark foreign exchange basket on Friday after Fund staff and IMF chief Christine Lagarde gave the move the thumbs up.The recommendation paves the way for the Fund's executive board, which has the final say, to place the yuan on a par with the U.S. dollar, Japanese yen, British pound and euro at a meeting scheduled for Nov. 30.Joining the Special Drawing Rights (SDR) basket would be a victory for Beijing, which has campaigned hard for the move, and could increase demand for the yuan among reserve managers as well as marking a symbolic coming of age for the world's second-largest economy.Staff had found the yuan, also known as the renminbi (RMB), met the criteria of being “freely usable,” or widely used for international transactions and widely traded in major foreign exchange markets, Lagarde said.“I support the staff’s findings," she said in a statement immediately welcomed by China's central bank, which said it hoped the international community would also back the yuan's inclusion.
The Yuan's inclusion in the IMF basket is a major move to break the stranglehold of US dollar dominance over the gold market. It will be most interesting to see the reaction of the market in the next few weeks before the IMF decision scheduled to be made November 30th.
With gold technically very oversold, it certainly is set up for a significant rebound, and perhaps finally an end to the four year old bear market.
Fiat currencies beware!