Yuan Overtakes Ruble as World Payments Currency: SWIFTYe Xie and Fion Li
For the first time, China’s yuan has overtaken the Russian ruble for transactions in the global payment system, according to Society for Worldwide Interbank Financial Telecommunication, a financial messaging platform.
The use of the yuan increased 24 percent in January from December and 171 percent from a year ago, while that of the ruble declined 5.4 percent on the month, the Belgium-based SWIFT said in a report today. The Chinese currency accounted for an all-time high of 0.63 percent of the global payments, making it the 13th most-used currency, compared with 0.56 percent for the ruble, now the 15th most-used. The euro leads the list, followed by the U.S. dollar and British pound.
China, the world’s second-largest economy, is promoting the role of the yuan, also known as RMB, in international trading and financing as it moves to reduce the control over its currency and open up its financial markets. Trading of the yuan outside the mainland has at least doubled to $6 billion a day from a year earlier, said Charles Feng, regional head for fixed-income trading at Standard Chartered Plc. in Hong Kong, last month.
The yuan is “a very young currency,” James Wills, a senior business manager at SWIFT, said in an interview from New York. “Growth has been dramatic and this is something we expect to continue.” Offshore financial centers such as Hong Kong, London and Singapore are fueling the growth of the yuan payments, according to the SWIFT report.
The euro was the most-used currency for global payments, making up 40.2 percent of the market share, down from 44 percent a year ago, according to Swift. The dollar accounted for 33.5 percent, up from 29.7 percent last year, and the pound represented 8.6 percent, down from 9 percent. The top four currencies, which also include the Japanese yen, took about 85 percent of the market share in January.
While the yuan is playing a bigger role in global markets, China’s capital controls will hinder it from becoming a “dominating” currency, according to Mark Williams, an economist at Capital Economics Ltd.
“Undoubtedly, the RMB will continue to become a more used currency in next few years, but expectations that it will become a dominating currency are wide off the mark,” said Williams, who previously advised the U.K. Treasury on China, in an interview from London. “It’s growing at a rapid pace, but there are significant restrictions to hold it back to make a major currency.”
The yuan climbed 0.04 percent today to 6.2273 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The currency reached a 19-year high of 6.2124 per dollar on Jan. 14. The 12-month non-deliverable forwards traded at 6.3228, suggesting traders expect the currency to weaken less than 0.1 percent in a year, according to data compiled by Bloomberg.
The yuan’s increased use in January compared with an average increase of 13 percent for all currencies, according to SWIFT, which provides services to more than 10,000 banks, financial institutions and companies in 212 countries.
In December, yuan payments exceeded those of the Danish krone, South African rand and New Zealand dollar.
While use of the yuan more than doubled from a year earlier, the ruble’s volume increased 18 percent, according to the report. A year ago, the yuan’s market share for global payments was 0.25 percent while the ruble accounted for 0.52 percent, according to SWIFT.
Share of Currencies in Global Payment as of January 2013 1. Euro 40.17% 2. U.S. Dollar 33.48% 3. British Pound 8.55% 4. Japanese Yen 2.56% 5. Australian Dollar 1.85% 6. Swiss Franc 1.83% 7. Canadian Dollar 1.80% 8. Singapore Dollar 1.05% 9. Hong Kong Dollar 1.02% 10.Thailand Baht 0.97% 11.Swedish Krona 0.96% 12.Norwegian Krone 0.80% 13.Chinese Yuan 0.63% 14.Danish Krone 0.58% 15.Russian Ruble 0.56%