China’s yuan back to sixth most-used world payment currency
China’s yuan moved up one notch in May to regain its spot as the sixth-most active currency for global payments, according to transaction service provider SWIFT.
China’s tight capital controls implemented this year and the resulting stabilisation of the currency have boosted demand for yuan-denominated assets and lending.
The latest ranking for May shows the yuan surpassed the Swiss franc with a global market share of 1.61 per cent, a slight increase from 1.6 per cent in April, when it had slipped back to seventh spot. In comparison, the US dollar was No 1 with a 43.9 per cent market share followed by the euro at 29.4 per cent.
The value of overall yuan payments increased 14.62 per cent compared to April, while payments across all currencies increased by 13.75 per cent, SWIFT said.
Hong Kong is the top global clearing centre for offshore yuan, with a 76.8 per cent weight in May followed by the UK at 5.4 per cent and Singapore with 4.6 per cent, according to SWIFT.
The yuan has rebounded about 2.3 per cent in value so far this year after depreciating 7 per cent last year. The People’s Bank of China last month tweaked its formula for calculating daily yuan reference rates and was said to have also engineered a spike in yuan appreciation, signalling official determination to support the currency.
However, market doubts over the yuan’s strength still linger because of worries over slowing economic growth in China for the rest of the year, and because the US Federal Reserve is expected to raise interest rates further and shrink its balance sheet.