HONG KONG, July 29 South Korea's yuan payments value in June rose more than six-fold from a year earlier, taking it to eighth position in the world for yuan payments excluding China and Hong Kong, global transaction services organisation SWIFT said on Tuesday.
For the month, 68.9 percent of all direct payments between South Korea and China and Hong Kong were in Renminbi, up from 32.8 percent from the same period last year, SWIFT said.
China is South Korea's most important trade partner, receiving nearly a third of the latter's exports, but South Korean companies have historically been underweight in the use of the Chinese currency.
That situation is set to change as a number of steps have been taken recently to boost the use of yuan currency between the two countries.
China's central bank assigned Bank of Communications , the country's fifth-biggest lender, as the yuan clearing bank in South Korea earlier this month.
The world's second-largest economy also agreed to award an 80 billion yuan ($12.88 billion) licence for South Korea to invest in its capital markets and help launch direct trading of the yuan-won pair.
"Korean companies are increasingly attuned to RMB developments as part of their global trade and liquidity strategies and they're capitalising on the opportunities the currency provides," said Martin Tricaud, CEO for HSBC Korea.
Though a latecomer to participate in the offshore yuan business, the country's yuan pool has increased sharply in the past year thanks to the attractive yields the currency provides.
Yuan deposits at banks in South Korea inched up by a net $640 million in June to a record high of $11.97 billion, the 12th straight month for yuan deposits to reach a record high, according to data from the Bank of Korea.
That makes competition to become the next biggest offshore yuan hub after Hong Kong fiercer as Beijing accelerates the pace of yuan activities in more countries and allows more foreign investors to enter its domestic market.
Singapore still led renminbi payments in June with a market share of 28.4 percent, followed by the UK at 22.5 percent, and the United States at 10.8 percent, SWIFT said.
In June, the yuan reinforced its position as the seventh most active currency for global payments and accounted for 1.55 percent of payments worldwide.
HSBC expects the yuan to be one of the top three global trade currencies by 2015 and to be fully convertible within 5 years. (Reporting by Michelle Chen; Editing by Jacqueline Wong)