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Yuan’s Global Usage Plummets in September Amid FX Strength - BLOOMBERG
(Bloomberg) -- Use of the yuan in global payments slumped by the most on record last month, according to transaction data compiled by global financial messaging service Swift.
The portion of transactions involving the currency declined to 3.6% in September, down 1.1 percentage points from the previous month, data going back to 2010 showed. Market share had hit a record high of 4.7% in July.
Analysts were uncertain as to what might be the main driver of the decline, with some pointing to an easing in weakness in the yuan, which had been under pressure for the first half of the year. The yuan strengthened for a third straight month in September and briefly touched the 7 per dollar level as investor sentiment improved toward China’s economy amid a series of stimulus measures to boost growth.
“After yuan’s depreciation pressure eased, firms might feel less motivated to use local currency settlement and they might use more of their dollar holdings,” said Ken Cheung chief Asian FX strategist at Mizuho Bank. “The exact conclusion for the reason, as well as the sustainability of the drop in yuan share, remains unclear without further details.”
China’s currency traded around the 7.12 per dollar level on Thursday.
Global banks use Swift to communicate with each other and manage interbank currency deals. China has been increasingly promoting its currency in global trade, a push hastened by the levy of US sanctions against Russia.
For Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group, the decline may be linked to a decrease in so-called swap trades in the debt market, popular with international investors.
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“As the Federal Reserve has entered a loosening cycle, yuan depreciation pressure reduced and China has introduced large-scale stimulus packages, such transactions have decreased in September,” he said. He expects the yuan’s market share to stabilize in the next few months.
--With assistance from Tian Chen.
(Adds comment from ANZ)
