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Yuan among top 10 active currencies, turnover triples- BIS survey
September 5, 2013 / 1:00 PM / 4 years ago

Yuan among top 10 active currencies, turnover triples- BIS survey

* Chinese yuan 9th most-actively traded currency

* Daily turnover at $120 bln, up from $34 bln three years ago

* Mexican peso also makes it into top 10, NZD slips out

* Sterling, Swiss franc see dips in market share

By Anirban Nag

LONDON, Sept 5 (Reuters) - Trading of the Chinese yuan in global foreign exchange markets has more than tripled from three years ago due to the expansion of offshore trade, making it the ninth most-actively traded currency, according to a survey by BIS.

The survey by the Bank for International Settlements showed the share of the yuan, which is only partially convertible, has doubled over the past three years to 2.2 percent of global turnover.

The Australian dollar and the New Zealand dollar also saw their shares of global forex trade increase, as Asian central banks in particular sought to reduce their exposure to the dollar and the euro, according to the BIS Triennial Central Bank Survey of trends in the foreign exchange market.

Sterling and the Swiss franc saw slight decreases in their market shares although they remained among the top 10 most actively traded currencies and were joined in the group by the Mexican peso.

Daily turnover in the Chinese yuan, also known as the renminbi, has soared to $120 billion from $34 billion three years ago when it was ranked the 17th most actively traded.

“The role of the renminbi in global FX trading surged, in line with increased efforts to internationalise the Chinese currency,” the BIS said in the survey, the most authoritative on the foreign exchange market and released every three years.

In recent years, China, while keeping a tight rein on its capital account, has stepped up efforts to promote wider use of its currency by introducing and expanding a slew of measures that allow two-way fund flows in the yuan.

Earlier this year, HSBC, Europe’s largest bank and which conducts a big part of its business in Asia, said it expects 30 percent of China’s total trade flow to be settled in yuan within the next three years. That would make it one of the top three currencies used in global trade.

For now though, the yuan was just behind the Mexican peso which was eighth in the global ranking.

Turnover in the Mexican peso reached $135 billion in April 2013, raising the peso’s share of global FX trading to 2.5 percent. The Mexican peso has also joined the world’s 10 most actively traded currencies, moving ahead of well established currencies such as the New Zealand dollar and the Swedish crown.

Part of the reason for the Mexican peso’s popularity is because speculators and fleet-footed investors like hedge funds are attracted by high interest rates, exposure to U.S. economic growth and a drop in domestic drug-related crime.

AUSSIE‘S SHARE RISES

The Australian dollar was the fifth most-actively traded currency, with its share rising to 8.6 percent from 7.6 percent while the New Zealand dollar’s share inched up to 2 percent from 1.6 percent three years ago.

Both those currencies have been in demand in the past three years from Asian central banks who have been keen to diversify their foreign exchange reserves into currencies other than the dollar and the euro.

“By contrast, sterling, the Canadian dollar, the Swedish krona and, most notably, the Swiss franc lost ground in global FX trading in relative terms,” the BIS said.

While sterling remained the fourth most-actively traded currency, its share of the daily global turnover dipped to 11.8 percent from 12.9 percent three years ago. The Swiss franc’s share also fell to 5.2 percent from 6.3 percent.

Amongst the commodity-linked currencies, the Canadian dollar’s share fell to 4.6 percent from 5.3 percent, three years ago. It was the seventh most-active currency, according to the BIS survey. (Reporting by Anirban Nag; Editing by Susan Fenton)

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