Time to set up US-China forex swap agreement
Add BT as a preferred sourceIN the incomplete architecture of the developing multi-currency reserve system, one key element is missing: a swap line between the US and China.
It is time the world's two largest economies filled this lacuna by negotiating a Federal Reserve-People's Bank of China (Fed-PBOC) swap agreement in each other's currencies, with the aim of facilitating dollar and renminbi liquidity on international financial markets.
Most of the over 30 swap lines agreed between the PBOC and foreign central banks in the last eight years have been designed to help renminbi settlement of international trade and investment, although they have been used for currency support in some emerging market trading partners as well.
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