The Chinese yuan has just become one of the
five most widely used currencies in global payments according to SWIFT, the Society of
Worldwide Interbank Financial Telecommunication. This marks an important milestone as the Chinese currency is playing a growing role in international payments. The Chinese government has been
encouraging the use of the yuan abroad by easing its control over the exchange rate
which is controlled by China’s central bank. This has helped the yuan in being recognized
as a major global currency. So which currencies did the Chinese yuan just pass and which are still ahead? Here are Tent’s TOP 10 currencies in world payments. The Singapore dollar has been the official currency of Singapore since 1967, two years after it became independent from Malaysia, and is issued by the Monetary Authority of Singapore (MAS). The current series of currency notes was introduced in 1999 and on the front they feature, the face of Yusof Bin Ishak, the first president of the republic of Singapore, while on the back the notes depicts civic virtues such as education, garden city, sports,
arts, youth, government, and economics. The polymer version is progressively replacing
the paper version due to its numerous advantages these include: better security features, durability,
waterproofing, reduced environmental impact, and cheaper production. But perhaps the most
interesting fact about the Singapore dollar is its S$10,000 note, which makes it the world’s
most valuable of all the banknotes in circulation… but these are becoming very rare as the MAS has
decided in 2014 to stop printing them and withdrawing them from circulation in an attempt
to fight money laundering. The Hong Kong dollar is the official currency of Hong Kong. Its issuance is governed by the Monetary Authority of Hong Kong which
licensed three commercial banks to issue their own bank notes for circulation. This arrangement
is somewhat comparable to the system used in the United Kingdom. Having three diferent
banks issue notes means that the designs for the same denominations differ depending on
which bank issued them. HSBC notes will depict a lion, the Bank of China depicts the Bank
of China Tower, and the Standard Chartered Bank uses images with the themes of technology
and heritage. Since 1983, the Hong Kong dollar has been pegged to the U.S. dollar. Today, the
peg has a lower guaranteed limit of 7.85 to the dollar and an upper guaranteed limit
set at 7.75…although the recent announcement of Switzerland abandonning its currency’s
peg to the Euro has investors wondering whether the Hong Kong dollar could be the next peg to fall. The Swiss franc has been the official currency
of Switzerland since 1850, and the currency of Liechtenstein since 1920. The Swiss franc
is considered a safe-haven currency because of the country’s political and fiscal stability.
The current notes depict famous Swiss artists and display all information in the four national
languages. A new series of notes is expected to be issued in 2016. As mentioned earlier,
the Swiss franc was pegged to the euro by the Swiss national Bank (SNB) back in September
of 2011 as the strength of the Swiss franc was starting to hurt Swiss exporters…but
on January 15, 2015, the SNB surprisingly removed the ceiling, anticipating a further
decline of the euro currency, meaning that the peg was becoming too costly for Switzerland.
This resulted in the Swiss franc increasing its value over the euro by 30% instantly.
Some benefitted greatly from this announcement, but others like the company The Swatch Group,
which relies heavily on exports, saw its shares lose 15% of their value overnight. Since this
decision, the Swiss National Bank’s credibility, and by extension, the credibility of central banks in general, has been questioned by some in the media. The Australian dollar is the official currency of the Commonwealth of Australia. This includes
Christmas island, Cocos island, Norfolk island, Kiribati, Nauru and Tuvalu. It officially
replaced the Australian pound in 1966 and was pegged to the U.S. dollar until 1983 when
it became a floated currency. The current series of banknotes was introduced in 1992
and they depict historical figures like Queen Elizabeth the II, Sir Henry Parkes (Father
of the Australian Federation), David Unaipon (an indigenous Australian preacher, inventor
and writer of the Ngarrindjeri), but also Australian writers, singers, inventors, military
commanders, politicians and journalists. Australia is the first country to have fully transitioned
from paper banknotes to polymer ones. Note Printing Australia, which is a subsidiary
of the Reserve Bank of Australia, introduced the polymer banknote technology back in 1988
and aside from printing Australian dollars, it now also prints polymer notes for a growing
list of other countries. The Canadian dollar has been the official
currency of Canada since 1858 and is often nicknamed the Loonie after the bird pictured
on the one dollar coin. It is a popular currency with central banks because of Canada’s stable
political and legal system, and the soundness of its economy. In 2011, Canada adopted polymer
technology for its banknotes which feature along with a maple leaf, a historical building,
an image depicting Canada’s contributions to the world, and prominent politicans such as Sir John Alexander McDonald (Canada’s first prime minister), Wilfried Laurier (one of the country’s greatest statesman) and of course the Queen of England. Fun fact, in 2012, Iceland
considered, for a brief moment, adopting the Canadian dollar to replace its currency which
had been losing value since the 2008 financial crisis; ultimately they decided against this. The yuan is known internationally as the Chinese currency, but it actually represents the primary
unit of the official currency of the Republic of China, which is the renminbi. In
Chinese it literally means the people’s currency. The distinction between the yuan and the renminbi
is similar to that between the sterling–the British currency, and the pound–its primary
unit). In 1889 the yuan began to replace the copper cash and various silver ingots
called sycees. Banknotes were issued in yuan denominations by several local and private
banks, along with the Imperial Bank of China. Even after the revolution, a great many local,
national and foreign banks issued currency which created hyper inflaction leading up
to and after the second WW. As the communist forces took control of most of China, they
introduced a new currency, initially in banknote form only, denominated in yuan. This became
the sole currency of mainland China at the end of the civil war. Todays renminbi yuan
was introduced in 1955 at a rate of 10,000 old yuan=1 new yuan, and until 2005, was
pegged to the U.S. dollar. With China’s growing domestic and global economy, there has been
a growth in the usage of renminbi as a reserve currency. Current banknotes feature on the obverse Mao Zedong and on the reverse famous Chinese landmarks. The yen is Japan’s official currency and one of the most traded currencies in the foreign exchange market. It has been regulated by the Bank
of Japan since WW2. In the 19th century, Chinese and Spanish, and later
South American traders, introduced the silver manilla galleon coins into southeast asia.
These coins garnered the name “round”, which translated to yen in
Japanese. The Japanese coinage of the same name was officially
adopted by the Meiji government in 1871 and it replaced the Tokugawa coinage, a complex
monetary system of the Edo period. The yen passed through multiple
standards, starting with a bimetalic standard of gold and silver until 1931, then followed
by a brief fiat model, then a fixed rate post war Bretton Woods System from 1949 to
1971, and was finally allowed to float in 1973 — floating allowed
major world currencies to respond to market mechanisms of the foreign-exchange market.
In that vein, if you’re in a scientific mood, the 1 yen coin is made out of 100% aluminum
and can float on water if placed correctly. Current banknotes feature the portraits of
a bacteriologist and two authors, including Fukuzawa Yukichi, one of the founders of modern
Japan. On a final note, today’s yen has seen the trend of depreciation reversed since the
global economic crisis of 2008. Most major currencies except the Swiss franc have been
declining relative to the yen. The pound sterling, or more commonly referred
to as the pound, is the world’s oldest active currency. Historically, the pound was a unit of account in Anglo-Saxon England, around 757–796 AD
during the reign of King Offa of Mercia, and equal to 240 silver
pennies and equivalent to one pound weight of silver; hence the term
“pound”. It saw its way through the reign of King Henry the II and even through the
United Kingdom’s colonial period where it circulated alongside native currencies. Today,
it’s the official currency of the United Kingdom, which despite having joined the European Union,
decided to keep its own currency. It is also the currency of several affiliated countries
and territories. Along with the U.S. dollar, the euro, and the yen, the pound forms the
basket of currencies which calculate the value of the International Monetary Fund special
drawing rights. These rights are claims of forgein exchange reserve assets which can
be exchanged in the currencies mentioned and represent the unit of account for the IMF.
The issuance of banknotes in the British Islands is a bit unusual in that it isn’t handled
exclusively by a central bank or government. Instead, seven retail banks, in addition to
the Bank of England, have the right to print their own banknotes, each with their own designs
and portraits. Fun fact, the Bank of England produces notes worth one million pounds, also
called giants, and others worth 100 million pounds, called titans, but they are only used
within the banking system and therefore are not in circulation. The euro was introduced in 1999 with physical distribution in 2002. The use of the euro removed the costs of exchanging currencies and facilitated member state commerce and economic interdependence. Currently it is the
official currency of the Eurozone, 19 members of the European Union, and 6 non E.U. states. It is used by 334 million Europeans daily, and another 210 million
people worldwide through pegged currencies. Current banknotes
illustrate relevant architectural styles of bridges, arches and gateways and they are
to be redesigned every 7-8 years to include newer member states. One example of that is
the inclusion of the Bulgarian Cyrillic alphabet on the new series of notes, in addition to the Latin and Greek alphabets added as a result of Bulgaria joining the Union. The European
Central Bank (based in Frankfurt), along with the Eurosystem–central banks of Eurozone
Countries, are responsible for setting the euro’s monetary policy. In 2009, the multi
country currency faced the European sovereign-debt crisis and continued to struggle in 2012 with the Greek
debt and Spanish banking sector troubles. Despite these struggles and the continued
policy disagreements between the French and German governments, the euro is the second
largest reserve currency and the second most traded currency in the world after the U.S. dollar. And, as of August 2014, with more than 995 billion euros in circulation,
it has the highest combined value of banknotes and coins in circulation in the world. The U.S. dollar is the world’s most common currency for international transactions and reserves.
First issued in 1792, the dollar was created by the U.S. Constitution and defined in the
Coinage Act (1792). Although the faces of the founding fathers and former presidents
on dollar bills have become familiar to us, this practice was actually compared to that
of European monarchs by the early leaders who were against it. Adding portraits on dollars
only started at the beginning of the 20th century. Current banknotes, also known as
Federal Reserve Notes, are issued by the Federal Reserve Bank. What began as a commodity based
currency in the 1790s at 371.25 grains of silver, transitioned in 1971, under Nixon,
to today’s fiat money based system, or money whose value is derived from government regulation
and law. Because of the recent global economic crisis, the U.S. dollar is seen as a more stable
reserve currency and its presence as a global reserve increased by about 2% totalling around
87% as of 2013. Its market strength can also be seen in the many countries where it’s
the official currency: East Timor, Ecuador, El Salvador, Marshall Islands, Federated States
of Micronesia, Palau, Panama, and Zimbabwe and a de facto currency for many more. This
dominance has allowed the U.S. government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year. The yuan is currently not included in the International Monetary Fund currency basket but the news of its ascendence on the list may soon change that. Just a couple of years ago the yuan was ranked 13 on the list. It’s now at number 5. How much higher will the yuan go and can it perhaps one day achieve the same status as the dollar or the euro?
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