China’s Bid To Weaken Dollar Dominance Faces Structural Limits

Economic

Forex

Summary:

China is accelerating efforts to internationalize the renminbi amid a weakening US dollar and rising geopolitical uncertainty, yet deep structural barriers mean the currency is far from displacing the dollar’s global dominance....

A Window Created By Dollar Volatility

China is attempting to capitalize on a rare moment of vulnerability in the global monetary system. Heightened geopolitical uncertainty linked to the economic policies of Donald Trump has unsettled markets, pushing the US dollar to four-year lows while driving investors toward traditional safe havens. Gold prices have surged to record highs above $5,500 an ounce, reflecting a broad reassessment of risk rather than a sudden loss of faith in the dollar itself. This environment has nevertheless created space for China to argue that reliance on a single dominant currency exposes the world to political and financial shocks.

Against this backdrop, China’s Communist Party journal Qiushi released previously private remarks by Xi Jinping, outlining ambitions for the renminbi to evolve into a currency widely used in international trade, foreign exchange, and global pricing. While no immediate shift in the monetary order is expected, the sharp decline in the dollar since Trump’s return to office has altered perceptions about whether alternatives can gain incremental ground.

Why Reserve Currency Status Matters

The dollar’s dominance has shaped the global economy since World War II and the Bretton Woods system, granting the United States enduring advantages in borrowing costs, financial influence, and sanctions power. Today, the International Monetary Fund recognizes several reserve currencies beyond the dollar, including the euro, yen, pound sterling, and the renminbi, yet their roles are not equal. According to IMF data, the dollar still accounted for roughly 57 percent of global foreign exchange reserves last year, compared with about 20 percent for the euro and only around 2 percent for the renminbi.

For Beijing, expanding the renminbi’s role is less about outright replacement and more about reducing exposure to US financial pressure while increasing strategic autonomy. This reflects a correlation between geopolitical tension and currency diversification rather than a direct causal shift away from the dollar driven by market fundamentals alone.

Policy Moves To Elevate The Renminbi

China has spent more than a decade laying the groundwork for broader renminbi use. Authorities have expanded foreign access to domestic stocks, bonds, and commodity markets, streamlined cross-border payment systems, and encouraged settlement of trade in renminbi rather than dollars. These efforts gained momentum after Western sanctions on Russia following the invasion of Ukraine, as China remained a key trading partner and renminbi-denominated transactions surged to record levels.

Officials at the People's Bank of China have framed this strategy as part of a transition toward a multipolar currency system. Last summer, central bank governor Pan Gongsheng stated that the renminbi had become the world’s largest trade finance currency and the third-largest payment currency. This growth reflects practical usage in trade corridors linked to China rather than a wholesale shift in global reserve preferences.

Global Reactions And Strategic Hedging

Concerns over US trade policy and sanctions have encouraged some countries to reduce reliance on the dollar at the margin. European Central Bank President Christine Lagarde has argued for a stronger international role for the euro, while emerging economies increasingly view currency diversification as a form of risk management. Within the BRICS grouping, discussions about alternative reserve arrangements have further unsettled Washington, prompting Trump to warn of punitive tariffs should such initiatives materialize.

These developments illustrate a growing desire among states to hedge rather than abandon the dollar. The behavior is driven by correlation between political risk and diversification strategies, not by a clear causal loss of confidence in the dollar’s underlying liquidity and institutional support.

Why The Dollar Remains Hard To Displace

Despite Beijing’s ambitions, major obstacles limit how far the renminbi can advance. Capital controls remain a central constraint, restricting the free movement of money into and out of China and discouraging global investors from holding large renminbi reserves. Financial institutions also remain wary of regulatory opacity and political intervention, factors that contrast sharply with the transparency and depth of US financial markets.

China’s own economic priorities further complicate the picture. Maintaining a relatively weaker currency supports export competitiveness, creating tension between domestic policy goals and the requirements of a widely trusted reserve asset. These structural realities suggest that while the renminbi’s international role can expand, it is unlikely to approach the scale of the dollar or even the euro in the foreseeable future.

An Incremental Shift Rather Than A Revolution

China’s strategy reflects a calculated assessment of global trends rather than an expectation of imminent dominance. The weakening dollar and rising geopolitical fragmentation offer an opportunity to gain incremental influence, particularly in trade finance and bilateral settlements. However, the foundations of dollar dominance remain intact, supported by deep capital markets, institutional credibility, and network effects that cannot be replicated quickly.

In this sense, Beijing’s push is best understood as an effort to narrow the gap rather than overturn the system. The global financial order may become more diversified over time, but the renminbi’s rise is likely to be gradual, constrained, and complementary rather than transformational.

Source: CNN

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Gerik

Economic

A Controversial Dual Role Comes To An End

Stephen Miran has stepped down as chair of the White House’s Council of Economic Advisers, ending an unusual period in which he simultaneously held a senior White House position and served as a governor at the Federal Reserve. The resignation was confirmed late Tuesday by White House spokesperson Kush Desai and follows a commitment Miran made during his Senate confirmation process. His decision aligns with long-standing norms designed to preserve the Fed’s independence from direct political influence, even though no formal rule explicitly barred his dual role.

Miran was appointed to the Fed’s seven-member Board of Governors by Donald Trump in September, after Adriana Kugler resigned unexpectedly. He completed Kugler’s term, which officially ended on January 31, but under existing rules, he is permitted to remain on the board until a successor is confirmed by the Senate. While previous administrations have appointed White House aides to the Fed, it has been customary for those individuals to fully relinquish executive branch roles before assuming monetary policymaking responsibilities. Miran instead took an unpaid leave, a choice that drew criticism and intensified scrutiny.

Implications For Monetary Policy Governance

The episode matters because Fed governors play a direct role in interest rate decisions and bank regulatory policy, areas where institutional independence is closely guarded. Miran had stated when appointed that he would resign from the Council of Economic Advisers if he stayed on the Fed board beyond January 31, and his resignation fulfills that pledge. The situation illustrates the delicate balance between political appointment power and the expectation of nonpartisan economic governance, highlighting how even temporary overlaps can raise concerns about perceived influence rather than direct causation over policy outcomes.

Miran’s departure also adds momentum to speculation surrounding upcoming changes at the top of the Fed. Trump has nominated Kevin Warsh to replace current Fed chair Jerome Powell, whose term as chair expires on May 15. Due to a structural quirk, Powell could remain on the Fed’s board even after stepping down as chair, limiting Trump’s ability to immediately appoint an additional governor. As a result, many analysts expect a sequence in which Warsh first fills Miran’s seat and is then elevated to chair in May, although this pathway has not yet been officially confirmed.

While Miran’s resignation does not directly alter monetary policy in the short term, it reinforces the sensitivity surrounding Fed governance at a moment of leadership transition. The situation reflects correlation rather than direct policy causation between political maneuvering and central bank decisions, yet it underscores how personnel shifts can shape expectations in financial markets. As confirmation battles and succession plans unfold, attention is likely to remain focused on whether the Fed’s institutional independence is preserved in both form and practice.

Source: AP

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Daniel Foster

Middle East Situation

Russia-Ukraine Conflict

Traders' Opinions

Energy

Data Interpretation

Economic

Commodity

Daily News

Political

Oil prices pushed higher on Wednesday, extending gains from the previous session after a series of confrontations between the United States and Iran in the Strait of Hormuz stoked fears of a wider conflict in the critical energy chokepoint.

Brent crude futures climbed 65 cents, or 1.0%, to $67.98 per barrel. In the U.S., West Texas Intermediate (WTI) crude was up 69 cents, or 1.1%, trading at $63.90 per barrel. Both benchmarks had already risen by nearly 2% on Tuesday.

Fresh Confrontations in the Middle East

The latest rally is directly linked to two recent military incidents. The U.S. military reported on Tuesday that it had shot down an Iranian drone that approached the Abraham Lincoln aircraft carrier in an "aggressive" manner in the Arabian Sea.

Separately, maritime sources confirmed that a group of Iranian gunboats approached a U.S.-flagged tanker in the Strait of Hormuz, the narrow waterway between the Persian Gulf and the Gulf of Oman.

These events have amplified market uncertainty, which was already heightened by diplomatic friction. Tehran is reportedly demanding that its upcoming talks with the U.S. on nuclear issues be held in Oman instead of Turkey and be limited to two-way negotiations, raising doubts about whether the meeting will proceed as planned.

"Heightened tensions in the Middle East provided support to the oil market," noted Satoru Yoshida, a commodity analyst with Rakuten Securities.

The Strait of Hormuz is a vital artery for global energy, with major OPEC producers like Saudi Arabia, Iran, the UAE, Kuwait, and Iraq using it to export crude, primarily to Asian markets. According to U.S. Energy Information Administration data, Iran was the third-largest crude producer in OPEC in 2025.

US Inventory Data Surprises the Market

Adding to the upward price pressure was industry data indicating a significant drop in U.S. crude stockpiles. According to sources citing American Petroleum Institute (API) figures, inventories fell by over 11 million barrels last week.

This sharp decline contrasts with expectations from analysts polled by Reuters, who had forecast an increase in crude inventories. The market is now awaiting official data from the U.S. Energy Information Administration (EIA), scheduled for release at 10:30 a.m. EST.

Broader Geopolitical Drivers

Beyond the immediate tensions in the Gulf, other global developments are also supporting oil prices. On Tuesday, a trade agreement between the United States and India boosted optimism for stronger global energy demand.

At the same time, continued Russian attacks on Ukraine are reinforcing concerns that sanctions on Moscow's oil exports will remain in place for an extended period.

"India's trade agreement with the U.S. to halt purchases of Russian crude, along with the ongoing Russia-Ukraine war, is also providing support," said Yoshida. He projected that WTI would likely continue to trade around the $65 per barrel mark for the time being.

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King Ten

Economic

Remarks of Officials

Political

The Trump administration is internally discussing plans to formalize a tariff increase on South Korea, a move that would escalate trade tensions between the two allies. Seoul's Trade Minister, Yeo Han-koo, confirmed on Tuesday that U.S. government agencies are consulting on the matter.

The potential action follows a threat from President Donald Trump last week to raise tariffs on Korean goods. The proposed hikes target "reciprocal" tariffs as well as specific levies on automobiles, lumber, and pharmaceuticals, which would jump from 15% to 25%. The administration cited delays in South Korea's legislative process for implementing a bilateral trade deal as the primary reason for the threat.

South Korean Trade Minister Yeo Han-koo speaks to the press at Incheon International Airport about the ongoing trade dispute with the United States.

Trump's Tariff Threat Edges Closer to Reality

Concerns in Seoul are mounting over the possibility that the White House will publish the tariff plan in the Federal Register, the official public record of the U.S. government. Such a step would transform the president's threat into a more concrete administrative action.

"Regarding the issue of putting the tariff plan on the Federal Register, I think that consultations among relevant government agencies are under way," Yeo told reporters. He described the process as a routine administrative procedure but acknowledged that discussions within the U.S. government are ongoing.

Seoul Mounts Diplomatic Push in Washington

In response to the tariff threat, South Korea has launched a diplomatic effort to de-escalate the situation. Minister Yeo arrived in Washington on Friday to dissuade the Trump administration from moving forward.

During his visit, Yeo met with U.S. Trade Representative Jamieson Greer. In their talks, he emphasized Seoul's firm commitment to fulfilling its side of the existing trade agreement, which includes significant investment pledges.

The diplomatic push involves multiple high-level officials. Industry Minister Kim Jung-kwan also met with Commerce Secretary Howard Lutnick, though those discussions reportedly ended without a clear conclusion.

Understanding the Core Trade Commitments

At the heart of the dispute is a trade deal under which Seoul agreed to invest $350 billion in the United States, with an annual cap of $2 billion. In exchange for this and other commitments, Washington agreed to lower its reciprocal tariffs on Korean goods to 15% from 25%.

Minister Yeo suggested that part of the friction may stem from a lack of understanding in Washington about South Korea's political and legislative systems. "I think we might have to continue our outreach to the U.S. as there are aspects of our system that the U.S. side does not fully understand," he noted.

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Samantha Luan

Stocks

Key Points:

· XSW confirms head-and-shoulders breakdown below $172 neckline

· Bearish momentum remains strong, sellers firmly in control

· Measured move suggests deeper downside toward $142–$144 if next support fails

AI-Driven Selloff Pressures Software Sector

Software related stocks got pummeled on Tuesday, as sentiment grew more bearish due to concerns about the impact of artificial intelligence (AI) on the industry. Fears were triggered following a disappointing earnings release from PayPal (PYPL) pre-market. Also, Anthropic released productivity tools for attorneys, which increased selling pressure on related legal publishing and software firms. Risks to the sector have been rising in recent months in anticipation that further advances in AI will cause a greater threat to software business models. Given the sharp declines across the sector, once support is found, buyers may return.

XSW weekly chart shows approach towards long-term uptrend line and 200-day average support (Source: TradingView)

XSW Confirms Head and Shoulders Breakdown

The SPDR S&P Software & Services ETF (XSW) is a proxy for the sector. It broke down from a head and shoulders top reversal pattern last week, on a drop through a swing low at $174.03 and then the neckline of the pattern around $172. Bearish follow-through has been sharp and decisive, leaving little doubt that the sellers are in charge. XSW reached a low of $153.85 on Tuesday. Nonetheless, XSW is rapidly approaching a potentially significant support zone at the convergence of several indicators near $152.

XSW daily chart shows head and shoulders bearish reversal and decline towards support zone. (Source: TradingView)

Support zone converges near $152

When multiple indicators point to a similar price zone, that area can act both as a magnet, pulling price to it, and a strong support zone in the case of XSW. A 78.6% Fibonacci retracement of the previous upswing is at $152.15, and a 141.4% (√2) projection of a bearish measured move points to $152.04. Further, a long-term uptrend line is currently rising through that price zone. If there is an overshoot to the downside, then the 200-day average is at $149.75, providing a lower potential target zone. Since XSW has fallen hard and is very close to that long-term average, it wouldn't be surprising for it to be hit before the current retracement bottoms.

Pattern targets $142–$144 if support fails

The head and shoulders pattern suggests a lower target could be reached. Measuring the pattern provides an initial downside target around $141.79. Of course, that level would be preceded by a failure of support at the uptrend line and 200-day average. That target is derived when using the neckline as the bear trigger. However, if the swing low at $174.03 is used, a target at $144.12 is indicated.

Source: FX Empire

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Justin

Forex

Economic

On January 30 2026 our clients was expecting for USDCHF to push higher to terminate red wave c, red wave y, blue wave (iv).

The first chart below was published in our private members area and clearly shows the Elliott Wave count was calling for the red wave c push higher.

The second chart is my buy entry. When the USDCHF pair tagged the bullish FVG zone (Gray Box) I entered the buy trade at 0.7667 with a 29 pip stop loss at 0.7638 and a take profit target at the 2R 0.7725.

Added confirmation for the buy entry was the bullish divergence market pattern (Pink) which formed at the red wave x termination.

USDCHF 1 Hour Chart January 30 2026

USDCHF moves higher and hits 2R target at 0.7725 where I closed buy position for +58 pips and a +2% profit gain. (Risking 1% on every trade)

A trader should always have multiple strategies all lined up before entering a trade. Never trade off one simple strategy. When multiple strategies all line up it allows a trader to see a clearer trade setup.

We at EWF never say we are always right. No market service provider can forecast markets with 100% accuracy. Only thing we at EWF 100%, is that we are RIGHT more than we are WRONG.

Of course, like any strategy/technique, there will be times when the strategy/technique fails so proper money/risk management should always be used on every trade.

Source: Elliott Wave Forecast

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Westpac

Political

Economic

The unemployment rate ticked up to 5.4% in the December quarter. The details were positive though, with growth in jobs and hours being outstripped by an even larger rise in participation.

· Unemployment rate: 5.4% (prev: 5.3%, Westpac: 5.3%, RBNZ: 5.3%, mkt: 5.3%)

· Employment change: +0.5% (prev: 0.0%, Westpac: +0.3%, RBNZ: +0.2%, mkt: +0.3%)

· Participation rate: 70.5% (prev: 70.3%, Westpac: 70.3%, RBNZ: 70.3%, mkt: 70.3%)

· Labour costs (private sector): +0.5% (prev: +0.4%, Westpac: +0.5%, RBNZ: +0.5%, mkt: +0.5%)

The December quarter labour market surveys showed some early signs of improvement in the jobs market, despite a further small rise in the headline unemployment rate. Wage growth measures remained unsurprisingly subdued at this stage of the cycle.

Overall, we think the results were broadly in line with the Reserve Bank's forecasts and won't give them much new to mull over ahead of their 18 February policy review. What that means is there is little here to hurry the RBNZ quickly towards reversing those last 75bp of OCR cuts made after August 2025. Still muted wage pressures should imply there is time to assess the strength and durability of the recovery before raising rates. We remain comfortable with our forecast of a December 2026 first rate hike.

The number of people employed rose by 0.5% for the quarter – actually more than what was suggested by the Monthly Employment Indicator, and ahead of the 0.3% rise in the working-age population. However, there was an even more significant rise in labour force participation from 70.3% to 70.5%, with the net result being an uptick in the unemployment rate. In any case, both of these 'surprises' are well with the margin of error for this survey, and we don't regard them as being meaningfully different from our expectations.

Another positive indicator from the household survey was a 1% rise in hours worked for the quarter, on top of a 1.1% rise in the September quarter. We certainly wouldn't dismiss this lightly, given that this measure has been an unusually good guide to the swings in quarterly GDP in recent times. However, there was a contrasting 0.5% fall in total hours paid in the business-oriented Quarterly Employment Survey (which had also seen a strong 1.1% rise last quarter).

Given the existing degree of slack in the labour market, wage trends unsurprisingly remained subdued. The Labour Cost Index rose by 0.4% overall for the quarter, with a 0.5% rise in the private sector and a more modest 0.3% rise in the public sector. On an annual basis the LCI rose by 2.0%, its slowest pace since March 2021.

The unadjusted analytical LCI, which includes pay increases that are related to higher productivity, rose by 0.8% for the quarter, slightly more than the 0.7% rise in the September quarter. The annual growth rate slowed from 3.4% to 3.3%, also the lowest reading since March 2021. The distribution of pay rates continues to drift towards annual increases in the 2-3% range, and away from the larger increases that were more common in previous years.