Can the Yuan be a reserve currency?

With ongoing pressure on the dollar the worlds reserve currency was in question. The greenback was under extreme pressure when it hit the infamous 2 to 1 against the pound. Volatility has been pushing it around against both the Euro and Yen, so what now for investors, stick with the dollar or look elsewhere?

South Korea's national pension fund has started looking outside the box and feels confidence in the Chinese Yuan. The Korean National Pension Service said it received approval from China for a Qualified Foreign Institutional Investor license, which would allow the Korean fund to buy Chinese securities such as A-shares and bonds.

China had started offering the Qualified Foreign Institutional Investor license, giving institutional investors a chance to invest in the Yuan. Although the Yuan is not free convertible recent reforms show positive signs.

The South Korean pension fund is the fourth largest in the world with AUM of around $300 billion, fund managers announced in their 2012 investment plan, released in late June, that it will invest 8.1% of its total in overseas shares this year, up from 6.6% in 2011; 4.1% in overseas bonds, unchanged from last year; and 9.2% in alternative investments, up from 7.8%.

South Korea is known for high volume in KOSPI futures however recently spot FX has been gaining momentum, Forexmagnates team covered the South Korean market in their last quarterly report.

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