26.04.202310:20 Forex Analysis & Reviews: China is reducing its dependency on dollar

China has surpassed another milestone in its quest to reduce dependence on the US dollar as in March, the use of yuan exceeded the use of dollar for the first time.

A report from Bloomberg Intelligence said the share of the local currency in international payments rose to a record 48%, from nearly zero in 2010. Meanwhile, dollar's share fell from 83% to 47% over the same period.

Clearly, China's agreement on mutual settlements in yuan for energy carriers has made a specific contribution to the overall coefficient, which is calculated based on the volume of all types of transactions, including securities trading. The only thing that this coefficient does not reflect is the transactions used by the rest of the world. That is why yuan's share in global settlements remained virtually unchanged at 2.3%.

Nevertheless, the increase in yuan's share of settlements allows local companies to reduce the risks of currency fluctuation. China's State Administration of Foreign Exchange (SAFE) also said the country will continue to expand settlements in yuan for more active development of foreign trade. "The internationalization of the yuan is accelerating as other countries seek an alternative payment currency to diversify risks, and trust in the Federal Reserve is not as good as it used to be," they said.

In terms of the forex market, euro bulls have a chance to continue a rally and update the highs. But in order to do so, the quote has to stay above 1.0950 and take control of 1.1000. This will allow a rise beyond 1.1035 and towards 1.1080. In case of a decline around 1.0950, the pair will fall further to 1.0910 and 1.0870.

Pound bulls also continue to have control over the market. However, the quote has to consolidate above 1.2450 in order to trigger a much larger rise to 1.2480 and 1.2520. In case there is a decline, bears will attempt to take 1.2410, which could lead to a fall to 1.2380 and 1.2340.