Trump-Fed Clash Weakens Dollar, Boosts China's Yuan Ambitions

• A criminal investigation involving Jerome Powell and perceived political pressure from Donald Trump on the US Federal Reserve is undermining confidence in the central bank's independence.
• This erosion of trust in US institutions, a pillar of the dollar's dominance, creates an opening for China's long-standing efforts to internationalize its currency, the yuan.
• China has significantly increased yuan usage in cross-border transactions, promoted yuan-denominated bonds, and established CIPS as an alternative to the dollar-dominated SWIFT system.
• Despite these advancements, the yuan still lags far behind the dollar due to China's capital controls and managed exchange rate, which deter many international investors.
• Analysts predict a gradual shift in global currency dynamics, with the Trump-Fed clash creating opportunistic moments for the yuan rather than an immediate dollar replacement.

Why It Matters: The Trump-Fed conflict erodes dollar confidence, creating an opening for China's yuan internationalization efforts.