Saudi Arabia appears to be sending a political message to the U.S. with reports that it will consider accepting yuan payments for oil sold to China, currency strategists say.
The world’s largest crude exporter, which has been in talks with China over yuan-priced contracts for six years, has sped up the negotiations, the Wall Street Journal reported Tuesday. The offshore yuan erased earlier losses after the report, yet investors from Nordea Investment Management to Generali Insurance Asset Management said it changes little for the dollar’s status as the world’s reserve currency.
“I don’t know if it is really real,” said Guillaume Tresca, a senior emerging-market strategist at Generali in Paris. “It happens at a moment when the geopolitical order is moving. The Saudis are trying to play with what they can. It is just a signal sent to the U.S. they want more consideration.”
The dollar has long been the default currency for pricing energy contracts around the world, elevating the importance of the greenback and bolstering Washington’s geopolitical influence. Yet with U.S. and allied sanctions on Russia restricting payments in dollars and cutting that nation off from half of its foreign reserves, other nations are reconsidering their relationships with the currency.
“Throughout the last few years, there have been many failed attempts to call the demise of the dollar,” said Witold Bahrke, a Copenhagen-based senior macro strategist at Nordea. “We think this is just another of such failed attempts.”
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