The renminbi dropped a position in October, going from fourth to fifth, in terms of its use as a currency for international payments, according to the latest SWIFT Renminbi Tracker report.
The report analyzes payment flows worldwide. According to Raymond Yeung, senior economist at ANZ Bank, the decline is mostly a result of the recent trade slump, as trade settlement is the major factor underpinning payment flows. “To some extent, it also reflects that exporters and importers have cut their exposure in renminbi with the recent exchange rate volatility.”
However, policymakers have been working to stabilize the FX market—in part by devaluing the currency and widening the trading band. The exchange-rate impact on payment flows should be transitory, says Yeung. “What is more important is the outlook of global trade, which will depend on the recovery of demand in the US, Europe and emerging markets.”
Vina Cheung, global head of renminbi internationalization in HSBC’s payments and cash management business, adds: “While the currency moved back into fifth position in the most recent SWIFT data, we believe the direction of travel is clear: Growing use of the renminbi for cross-border trade and investment shows that the currency is becoming deeply embedded [in] the international economy.”