Currency swap, direct Yuan/JPY trading

最近消息:
1. China and Pakistan announced currency swap for 10 billion Yuan. This is the 9th such deals China has done with trading partners;
2. Japan and China to start direct Yuan/Yen trading without involving the US dollar;

Firstly Using US dollars in international trades lends support to the US dollar value;

secondly US banks get a cut from any transactions involving US dollars.

These kind of development reduces support for the US dollar, and increases support for RMB. The greater Asia economic integration with China at the centre is strengthened.

Remember, there has been too much US dollars issued/printed. The US is not experiencing hyper-inflation because significant amount of US dollars went into the international market.

Nowadays the US dollar derives its value mainly from its use as international trade currency and international central bank reserve holdings. The more direct bi-lateral currency deals China does with other countries, the more economic activity is pulled away from the US dollar support: for the same or more US dollars will be chasing less and less goods/services, resulting in decreased buying power for the USD (increased inflation in US dollars).

The noose is slowly but firmly tightening, and the noose is around the neck of the US dollar system.