Cooling growth pulls China's yuan down to third place in global trade finance: SWIFT

November 22, 2016 10:41 PM EST

Chinese 100 yuan banknotes are seen in this picture illustration taken in Beijing July 11, 2013. REUTERS/Jason Lee/File Photo


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HONG KONG (Reuters) - China's yuan slipped one place to the third most-active currency for global trade finance, overtaken by the euro, partly due to slowing growth in the world's second-biggest economy, global transaction service provider SWIFT said on Wednesday.

The rapid cool-down in China over recent years was also a factor in the yuan moving one notch down to sixth most-used world payment currency, with the Canadian dollar nudging ahead to fifth place.

The yuan's usage by value in traditional trade finance – letters of credit and collections – has been decreasing since 2014. Its market share fell to 4.61 percent from 8.66 percent three years ago when it was the second most-active currency in trade finance after the dollar, according to SWIFT.

Since October 2013, trade finance values in the yuan have decreased by 66 percent, whilst trade finance across all currencies decreased in value by 35 percent.

"The general slowdown of the Chinese and world economies over the past few years has impacted global trade growth across all currencies, not just the yuan," says Michael Moon, Asia Pacific head of Payments Markets at SWIFT.

"On a positive note, the inclusion of the yuan in the Special Drawing Right (SDR) basket should generate further trust and confidence in the RMB currency and support further yuan internationalization."

In terms of international payments, compared to September 2016, the yuan has dropped one position to the sixth for international payments in October, with a share of 1.67 percent. The Canadian dollar, with a share of 1.82 percent, pulled up to fifth place.

The decrease in the yuan's international payments usage was likely due to seasonal effects following the Golden Week holiday in China in October, SWIFT said.

Yuan payments value decreased by 22.44 percent in October from a month earlier, whilst in general all payments currencies decreased by only 5.96 percent.

The yuan has depreciated more than 5 percent against the dollar so far this year, with its decline gathering speed since Republican Donald Trump's upset U.S. election win boosted the greenback against most other global currencies.

Many analysts, including those from HSBC and Standard Chartered, have recently revised down their forecasts for yuan/dollar in the coming months, as capital outflows accelerate from emerging markets to the U.S. on expectations Trump-led policies will boost fiscal spending and lift U.S. interest rates.

The yuan was trading at 6.8930 on the dollar, flat versus Tuesday's close, and remains close to levels of June, 2008.

(Reporting by Michelle Chen; Editing by Shri Navaratnam)



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