Use of yuan in cross-border mainland China trade hits 3-month low

Only 16 per cent of the mainland's cross-border trades were settled in yuan last month, a three-month low, as companies continued to avoid the currency amid its uncertain outlook and rising volatility in the foreign exchange market.

In June and July, yuan trade settlement accounted for 21 per cent and 27 per cent of the mainland's cross-border trades, respectively.

A total of 352.1 billion yuan (HK$444.8 billion) worth of cross-border trades were settled in the mainland currency last month, according to the People's Bank of China.

During the same period, the value of imports and exports totalled US$367.1 billion, meaning more exporters and importers chose to settle their trades in other currencies, such as the US dollar.

While it is unclear which way the yuan is heading, the greenback has been appreciating on the expectation that the United States will roll back quantitative easing by year-end and begin a gradual increase in interest rates next year.

Since early June, the yuan has been a top performer, recovering over half of the losses it suffered in the first half. Yet currency analysts are divided on its outlook for the rest of the year.