The Central Bank of Israel announced one of the biggest changes to its national reserve currency in more than a decade, adding China’s currency, the yuan, along with three other currencies to a reserve that last year topped $200 billion for the first time.
Starting this year, the mix of currencies in Israel’s reserves will expand from the trio of the US dollar, euro, and British pound to include the Canadian and Australian dollars, as well as the Japanese yen and Chinese yuan.
Deputy Governor of the Bank of Israel, Andrew Abir, said in an interview with Bloomberg: ”We need to look at the need to earn a return on the reserves that will cover the costs of the liability.”
“The dramatic increase in Israel’s foreign exchange reserves prompted the central bank to lengthen its investment horizon,” Abir said.
Following discussions held by the currency committee last year, the pound and yen will account for 5 percent of the reserves, and the currencies of Canada and Australia will each have 3.5 percent, according to Bloomberg.
Under the new approach, the yuan’s share will be set at two percent, according to the annual report of the Israeli central bank published late last month.
Saudi Arabia also recently announced prospective plans to switch from the US dollar to the Chinese yuan in all future oil sales to China, a move which would threaten the global hegemony of the greenback.
Riyadh is in active talks with Beijing over this potential transition, according to a report by the Wall Street Journal on 15 March.
Despite these talks floating around for years, it has only been since the relationship between Saudi Arabia and the US began to thaw with the arrival of Joe Biden at the White House that they have now taken a serious turn.
Trading oil with Saudi Arabia in the yuan would also step up this yuan-based oil contract project. In 2021, Saudi Arabia was the top supplier of crude oil to China, with Russia in second place.