Yuan jumps to fifth most traded currency: Report

By Al Mayadeen English
Source: The Global Times
29 Oct 2022 10:53

The Chinese yuan shows the largest increase in market share since a 2019 survey.

The Chinese yuan shows the largest increase in market share.

A report released by the Bank of International Settlements (BIS) showed that the Chinese yuan has moved up to the fifth-most traded position, in terms of total global foreign exchange turnover, with a market share of 7%.

The yuan's new ranking, which increased from eighth place in a 2019 survey, highlights the currency's appeal in the face of efforts to de-dollarize the world's economies and a general consensus among investors about the world's second-largest economy's promising future.

The trading in OTC FX markets reached $7.5 trillion per day in April 2022, up 14% from $6.6 trillion three years earlier and setting a new record high, as per the report entitled "triennial central bank survey of foreign exchange and over-the-counter (OTC) derivatives markets in 2022”.

Following the war in Ukraine, there was "increased FX volatility due to changing expectations about the path of future interest rates in major advanced economies, rising commodity prices, and geopolitical tensions", the report added.

The Chinese yuan, which was on one side of 7% of all trades in 2022, up from 4% in 2019, showed the largest increase in market share since the 2019 survey.

Chief research fellow at the Sinosteel Economic Research Institute Hu Qimu said as quoted by The Global Times that countries are actively looking for alternative currencies to insure against financial risks as Fed interest rate hikes cause both advanced and developing economies' currencies to depreciate sharply.

In this environment, the Chinese yuan, which saw relatively "moderate" value depreciation compared to other major currencies like the pound and euro, has emerged to become the trade settlement and foreign exchange reserves of more nations, Hu added.

"The yuan's expansion in the global market also reflects the global confidence on the outlook of the Chinese economy, which is underpinned by its position as the world's largest trading nation, its sound economic fundamentals and sheer market size," Hu stressed, as quoted by the Global Times.