Citi: Chinese yuan is still far from becoming a ‘safe-haven’ alternative to the U.S. dollar

Don’t expect the Chinese yuan to become a “safe-haven” alternative to the dollar or U.S. Treasurys anytime soon, says Ebrahim Rahbari, global head of foreign exchange analysis at Citi. “I’m very skeptical,” Rahbari told CNBC’s “Street Signs Asia” on Thursday, when asked if the Chinese currency could develop a safe-haven status of its own.

Rahbari explained so-called safe-haven assets typically have certain attributes. Firstly, the analyst said, they tend to offer a long-term store of value function. In the shorter-term, he added, they also provide “refuge” during “periods of crisis.” “Clearly, the yuan doesn’t qualify,” Rahbari said. “You can’t get in and out, both in terms of how easy it is to access … the local financial markets but also because the liquidity simply isn’t there in a lot of the … assets still,” he said.

As a result, even if the outlook for the Chinese economy and its financial markets is “broadly more benign,” the yuan has a “very, very long way ahead” before it can become a real alternative to the dollar and Treasurys, the Citi analyst said.

The yuan has strengthened significantly in recent days following a surge in the mainland Chinese stock markets, with the Shanghai composite soaring nearly 6% on Monday alone. The yuan last traded at 6.99 per dollar as of Thursday afternoon Singapore time, after seeing levels above 7.05 earlier in the month. The currency’s offshore counterpart, meanwhile, changed hands at 6.9892 per dollar.

The Chinese yuan is still far from becoming a ‘safe-haven’ alternative to the U.S. dollar, Citi says, CNBC, Jul 9