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By Pratima Desai
LONDON, July 28 (Reuters) - The London Metal Exchange’s clearing house will from Tuesday accept the offshore yuan as cash collateral, a step that will further Chinese ambitions to see its currency more widely used in international trade.
The move follows regulatory approval by the Bank Of England, the exchange said in a release. The LME is owned by Hong Kong Exchanges & Clearing Ltd.
“The renminbi (yuan) is on its way to becoming one of the world’s most widely used currencies, and we are pleased to be able to help our members take advantage of the opportunities arising from the renminbi’s internationalisation,” said Trevor Spanner, Chief Executive of LME Clear.
LME Clear already accepts the dollar, sterling, euro , yen as cash collateral.
Members of the clearing house have been calling for the exchange to extend the list of accepted cash collateral to include offshore yuan, which unlike the onshore yuan is freely tradeable.
“It does make it easier for our Asian business to be able to use the yuan to clear,” a senior metals trader said. “It’s another step towards a freely floating yuan, but the process is going to take a long time.”
Chinese-owned BOCI Global Commodities will be the first LME Clear Member to submit CNH collateral. The LME currently has six Chinese members.
The yuan overtook the Canadian and Australian dollars as global payments currency in November 2014, according to Swift.
Swift in January said the yuan was now one of the top five payment currencies alongside the dollar, euro, sterling and yen.
China is pushing for the yuan to be included in the International Monetary Fund’s currency basket known as Special Drawing Rights, this year. (Reporting by Pratima Desai, editing by Louise Heavens and William Hardy)