The decline of the dollar and the rise of the renminbi could be the “story of the next cycle” thanks to a confluence of political, economic and structural shifts, a large asset manager is predicting.
The widening ambit of US sanctions, epitomised by a renewed push to cut Iran’s oil exports “to zero”, but also encompassing measures against the likes of Russia, Venezuela, North Korea and to a lesser extent China and the EU, will be one driver of “de-dollarisation”, as countries seek to cut their exposure to the greenback, according to Investec Asset management, a $134bn fund house.
Investec also pointed to structural shifts in China, such as the decline in the working-age population, which will cut the domestic savings rate, leading to persistent current account deficits, which Beijing would prefer to fund by borrowing in its own currency, rather than that of the US.