Chinese Yuan to Be World's 3rd Largest Reserve Currency 

As Beijing seeks to increase the use of the yuan internationally, the Chinese currency may rise to the rank of the third largest reserve currency in the world in 10 years, according to Morgan Stanley forecast.

Bank analysts said in a report released on Friday, citing CNBC, that the yuan's share of global reserve assets of foreign currencies could more than double its current level of 2% and exceed the share of the Japanese yen and the British pound.

The Chinese currency, formally known as the renminbi or yuan, could reach 5-10% of reserve assets by 2030, according to estimates.

Morgan Stanley has not changed its positive outlook for the yuan despite the impact of the Coronavirus pandemic on the Chinese economy.

Central banks around the world are gradually storing the yuan in their vaults. At least 10 currency regulators added to their foreign exchange reserves last year, with the total number of holders reaching 70.

“[This goal] is not unrealistic in light of the opening of financial markets in China, the growing integration of the cross-border capital market that we see through equities and fixed income, and an increasing proportion of cross-border transactions in China are denominated in yuan,” said Morgan Stanley international strategic expert James Lord.

Some analysts indicated that the yuan will not sweep the dollar off the leading position anytime soon, yet, other indicated that the dollar would lose its grip on global markets.

Strategists at Goldman Sachs warned of 'real concerns about the longevity of the US dollar as a reserve currency'. International Monetary Fund (IMF) data shows that the yuan's share of global reserves has doubled since it was included in the main reserve currencies basket of the IMF in 2016.

At that time, the yuan's share was 1%, and in 2020 it's 2.02% of global reserves. Its two main competitors - the yen and the pound sterling - own 5.7% and 4.43%, respectively.

Meanwhile, the US dollar represents approximately 62% of global foreign exchange holdings and the euro represents more than 20%.