It’s the fifth most used currency in international payment, up two notches from a year ago, and now the renminbi is about to take another big step to globalization.
The London Metal Exchange (LME), the world’s largest venue for trading metals where US$15 trillion of metals was traded last year, is set to accept yuan as collateral for banks and brokers that trade on its platform.
The Chinese currency joins the US dollar, the euro, the British pound and the Japanese yen, which are all permissible as LME collateral, according to the Wall Street Journal.
“In the commodities area, it makes absolute sense to start providing renminbi-denominated services,” said Trevor Spanner, chief executive of the LME’s clearing house business.
While largely a technical change, the LME move marks another milestone for China’s currency.
A Bank of England survey on Monday showed that trading in yuan rose 25 percent in London in the six months to April, even as trading volumes in other currencies fell by 8 percent on average over the same period.
Meanwhile, China, whose economy is a major driver of demand for a range of commodities, is also taking a greater role in metals markets specifically.
Last year, Hong Kong Exchanges and Clearing Ltd., which owns the LME, launched yuan-denominated futures contracts for some industrial metals, while the LME signed agreements with two Chinese companies to explore ways of expanding use of the yuan.
In June, the London Bullion Market Association said Bank of China Ltd. will become the first Chinese bank to participate in the daily process for setting the price of gold.
China vies with India as the world’s largest consumer of gold, according to the World Gold Council.
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