The use of the Chinese yuan in foreign-exchange swaps has surged to a record amount in the first quarter, with swap line balances accounting for 109 billion yuan. These arrangements allow central banks to exchange one another's currencies, guaranteeing to return the money for the same exchange rate at a future date, with interest. This increased use of the yuan may indicate a global de-dollarization swing, as many central banks move away from reliance on the greenback.
Foreign banks have also led a surge in gold purchases, fueling a historic high in the last three quarters. In a de-dollarized future, the yuan has been referred to as a potential alternative, but most analysts agree that it's seriously handicapped by how tightly controlled the currency is by the Chinese government. Nonetheless, China has been ramping up efforts to disrupt dollar trade, entering into non-dollar agreements with countries such as Brazil and Kazakhstan. Amid Chinese cross-border transactions, the yuan recently topped the dollar as the most used currency.
The People's Bank of China did not make public which central banks relied on the swap lines in the first quarter. Meanwhile, the US has standing currency swap agreements with five national banks in Canada, England, Japan, Switzerland, and Europe. These developments suggest that central banks are looking to move away from the dollar and deal with domestic difficulties.