Detailed presentation of the US dollar :
First of all, the US dollar is the official currency of the United States and its island territories. It is currently the largest currency in the world and the most traded currency in the foreign exchange market. As such, it is also the world's leading reserve currency. It is used by several countries in the world outside the United States.
As far as the monetary policy applied to the US dollar is concerned, it is of course the FED orFederalReserveBoard that is in charge. Its role is to define and implement the country's monetary policy through the Federal Open Market Committee or FOMC. The voting members of the FOMC are 7 Fed directors and 5 presidents of the 12 District Reserve Banks. The FOMC holds 8 meetings each year that are worth watching closely as they usually announce interest rates and growth forecasts.
It should also be noted that the Federal Reserve now enjoys a great deal of independence in the way it sets monetary policy for the U.S. dollar, since it is less subject to political influence due to the fact that the majority of its members serve for long periods. Thus, they have the opportunity to cover the various stages in which one party predominates in the presidency and in Congress.
The US Federal Reserve is also responsible for publishing a semi-annual report on monetary policy in February and June. This report is followed by a speech by the president of the reserve, who answers questions from the US Congress and the banking committees about this report. Let's remember that this report is particularly interesting since it gives the FOMC's projections for unemployment, inflation and GDP.
One of the major differences between the Fed and other global banks is that the Federal Reserve's objectives are set for the long term with regard to sustainable economic growth and price stability. In order to achieve these goals, the Fed must therefore use monetary policy as a means to achieve balanced growth but also to reduce inflation and unemployment. To do this, it has several means at its disposal, including open market operations at market conditions and the target federal funds rate.
Finally, as far as the dollar is concerned, its liquidity and volatility are extremely high, which calls for caution if you wish to invest in the USD/CNH currency pair.
Detailed presentation of the Yuan :
Let's now move on to a complete presentation of the Yuan which is the Chinese currency and is officially called Renminbi or RMB. The Yuan is in fact only a unit of account and is issued by the People's Bank of China or PBC.
The Yuan has of course played a major role in Asia since the 2000s when the Chinese government wanted to internationalize its currency. The objective is to try to keep a certain stability of this currency in Asia so that the Yuan is used and accepted as an international currency and as an alternative to the American dollar. The Yuan is thus playing an increasingly important role in Asian trade, like the dollar in the United States and the euro in the European Union.
Recently, the Yuan also entered the IMF's special drawing rights basket. Indeed, it was in November 2015 that the International Monetary Fund approved the inclusion of the Chinese currency in the basket of currencies that is used to set the value of special drawing rights or SDRs. This measure thus came into force in October 2016 and is above all a technical measure, but one that nevertheless has an important symbolic significance. Let us recall that SDRs have a limited role. They were created in 1969 by the IMF to supplement the official foreign exchange reserves of its member countries and also serve as units of account. SDR holders can thus exchange them for several currencies on the basis of agreements between member countries or at the request of the IMF.
The inclusion of the Yuan in the SDR also increases confidence in this currency.
Finally, the Yuan is gaining more and more ground but is still far from competing with the US dollar in achieving the status of reserve currency. However, its influence on the international scene is growing strongly.