BIS: Yuan is most actively traded emerging market currency

The Chinese yuan has overtaken the Mexican peso as the most actively traded emerging market currency, reflecting China’s growing influence on the global economy, a survey of the foreign exchange industry showed.
The yuan or renminbi was the world’s eighth most actively traded currency overall, moving up from the ninth position in 2013, according to the Bank for International Settlements’ triennial survey of forex activity.
The average daily turnover of renminbi almost doubled, from $120 billion to $202 billion, between April 2013 and April 2016, representing a rise in its share of global turnover to 4 percent from 2 percent, the BIS said.
“Ninety-five percent of renminbi turnover is due to trading against the US dollar. The average turnover of dollar/yuan rose from $113 billion to $192 billion over the three-year period,” the survey said.
The surge in trading in the yuan comes as China, the world’s second largest economy after the US, presses ahead with efforts to internationalize the yuan and make it more easily available for trading.
The International Monetary Fund’s admission last year of the yuan into its benchmark currency basket has also meant that Chinese unit will make up a 10 percent share of global central bank reserves.
The yuan’s rise supports recent data from banking network SWIFT that shows that it is now the fifth most-used currency for international payments. The big bank-to-bank trading platforms have also reported a surge in its usage.
The BIS survey also showed that several other emerging market currencies, particularly from the Asia-Pacific region, gained market share. The Korean won, Indian rupee and Thai baht were among the currencies that advanced in the ranking by two or three places apiece.
In contrast, the turnover of some emerging market currencies — notably the Mexican peso and Russian rouble — peaked in 2013 and has since exhibited a significant decline. That was broadly in line with a drop in commodity and oil prices during that three year period which made both the peso and the rouble less attractive currencies to buy.
Among the other heavily traded advanced economy currencies, the commodity-linked Australian dollar lost market share along with the Swiss franc. In contrast, sterling , the Canadian dollar, Swedish krona and Norwegian crown gained share in global FX turnover. 
The BIS said that global currency trading fell to a daily average of $5.1 trillion in April, on Thursday, the first contraction shown in its triennial survey of the world’s largest financial market since 2001.
The 5.5 percent decline from a record $5.4 trillion a day average three years ago comes as the industry faces a continued regulatory squeeze on bank trading and after a global market rigging scandal that resulted in major banks being fined billions of dollars.
The BIS triennial survey is the most comprehensive report into the 24 hour-a-day foreign exchange market, which transcends national borders and still dwarfs all other financial markets.
The fall was driven by a 15 percent decline in spot FX transactions to an average $1.7 trillion a day from $2.0 trillion three years ago.
This overshadowed a 6 percent increase in FX swaps trading to $2.4 trillion a day, but even that was significantly slower than the 27 percent surge in the three years to April 2013, the BIS said.
The BIS noted that total turnover was elevated in 2013 by yen-related activity in response to Bank of Japan monetary policy moves, and that at 2016 constant exchange rates volume actually rose 4 percent.
“Nevertheless, the latest developments contrast with the strong growth in turnover observed between Triennial Surveys since 2001,” the BIS said.
The US dollar strengthened its position as the world’s most dominant currency, on the side of 88 percent of all currency transactions compared with 87 percent three years ago.
The euro’s role in world FX trading continued its decline since the euro zone debt crisis erupted in 2010. The single currency’s share fell to 31 percent from 33 percent, the BIS said. It was 39 percent in 2009.
The Japanese yen’s share fell one percentage point to 22 percent, while the Australian dollar and Swiss franc also saw their market shares slip, to 6.9 percent from 8.6 percent and 4.8 percent from 5.2 percent, respectively.

Source: Arab News