Chinese currency, Yuan has for the first time broken into the list of the top 10 most-traded international currencies, according to a ranking by the Bank for International Settlements (BIS). The world’s second-largest economy is the ninth most traded currency in the world reflecting the growing clout of the nation and growth of the global foreign-exchange market, says a report from The Wall Street Journal.
Yuan gaining, euro declining
In April, nearly 2.2 percentage of foreign exchange trading was held in yuan all over the world, which is two times the share of foreign exchange trading in April 2010. Dollar was the top most with 87 percent of all trades followed by the euro with 33 percent of all trades while Japanese yuan was in 23 percent.
Euro trading has declined in the foreign exchange market (39 percent in 2010), whereas the United States and yuan surged to a greater share. The euro saw fewer trades due to declining concerns over European sovereign debt.
According to a report from BIS, trading in the Chines yuan has grown three times over the past three years, to $120 billion, in 2013. Trading in the United States dollar has averaged to $4.65 trillion in 2013.
Yuan liberalization helping
In recent years, the Chinese government has kept its currency volatile due to pressure from other nations, which has increased trading activity.
The recent trading surge in Chinese currency exhibit the nations ambition to gain more power in the global market, which at present is dominated by dollar followed by Euro. The yuan was liberalized by the government of China in 2009, but due to strict regulations it was difficult to pay directly in yuan. However, in 2012 an announcement from Central bank allowed all Chinese companies to settle trades in yuan and exchange foreign currency with it.
Traditionally, Chinese Government has been resorting to pegging its currency to the dollar to promote manufacturing in its export based economy. However, recently the economy has driven criticism and has been accused of currency manipulation.
“As China starts loosening up its banking regulations, companies will eventually see the renminbi on par with the euro,” said Anil Sawrup, a senior vice president at the currency-exchange firm Cambridge Mercantile Group.
Global currency market growing
Further, the report reveals that London is the top spot for foreign exchange accounting for 41 percent of daily average currency trading, up from 32.6 percent in 1998. Currency market share of the United States gained marginally rising to 18.9 percent in 2013 from 18.3 percent 15 years before.
The amount of foreign exchange trading increased to $5.3 trillion per day in 2013, up from $4 trillion in 2010, which is an increase of more than 30 percent in the three years.