Yuan’s Share of World Currency Trading Doubles, BIS Survey Shows

Updated on
  • Yuan accounts for 4% of turnover, most among emerging markets
  • Report says 95% of yuan trades were against dollar in April

China’s yuan has doubled its share of global currency trading in the three years through April 2016, according to the latest triennial survey conducted by the Bank for International Settlements.

The yuan’s average daily turnover rose to $202 billion in April from $120 billion in the same month of 2013, boosting its ratio of global foreign-exchange trading to 4 percent from the previous 2 percent, the survey results show. That puts the currency in eighth place overall. Dollar-yuan became the sixth-most traded currency pair, advancing from ninth place in 2013, BIS said, while the yuan overtook the Mexican peso as the most actively traded emerging-market currency.

The survey polled central banks and other authorities in 52 jurisdictions, with data from almost 1,300 banks and other dealers, BIS said. The dollar increased its lead as the most-traded currency with 88 percent of deals, up a percentage point from three years ago. The euro remained No. 2, though its share fell to 31 percent. Yuan transactions in both the onshore and overseas markets were included in the results.

“China’s internationalization agenda and official efforts to encourage greater yuan usage" have contributed to the increase in yuan trading, Eddie Cheung, a foreign-exchange strategist at Standard Chartered Plc, said before the release of the BIS data. "Investor accessibility to yuan products and currency volatility are the main obstacles now."

The Bank for International Settlements report comes a month before the yuan is scheduled to join the dollar, euro, British pound and Japanese yen in the International Monetary Fund’s basket of global reserves.

China has been trying to increase the yuan’s global usage, setting up clearing banks around the world and issuing bonds denominated in the currency in London. On Aug. 10, the People’s Bank of China said it plans to increase the yuan’s internationalization by seeking more cooperation with other countries and improving the infrastructure needed to support wider use of the yuan.

The campaign has faced challenges, with China’s capital curbs and control of the currency dissuading investors. Society for Worldwide Interbank Financial Telecommunications data show the yuan’s share of global payments shrank to 1.72 percent in June, the lowest since October 2014, before inching up to 1.9 percent the following month.

The BIS survey also shows limited success for the PBOC’s efforts to shift attention away from the yuan’s moves against the dollar alone, with the report saying that 95 percent of the currency’s turnover was against the greenback this April.

Yuan Moves

The onshore yuan fell 0.05 percent to 6.6812 per dollar as of 5:15 p.m. in Shanghai on Friday, China Foreign Exchange Trade System prices show. The exchange rate in Hong Kong dropped 0.13 percent. The central bank strengthened its daily fixing by 0.42 percent this week, the most since early July.

“The report has highlighted the growing importance of the Chinese yuan as a global currency, use for transactions, trade, borrowing and lending,” said Valentin Marinov, head of Group of 10 strategy at Credit Agricole SA’s corporate and investment banking unit in London. “This is an important endorsement for the currency as we are getting closer to inclusion of the yuan in the SDR basket. Presumably the role of the currency will grow even further after the SDR reform.”