The Chinese renminbi is now the 4th most active global payment currency according to yesterday’s SWIFT report titled, “Renminbi's Stellar Ascension: Are You On Top Of It?” The renminbi, reaching a record high of 2.79% of global payments, overtook the yen by a slim margin of 0.03%. The US dollar, euro and sterling still dominate the top 3 positions accounting for 44.8%,27.2% and 8.5% respectively so the renminbi is expected to hold around this position for a while having jumped 3 positions in the past year and another 5 in the 12 months prior to that. Following this trend it is certainly conceivable for the renminbi to overtake sterling around 2020 and catch-up with the euro within a decade.
SWIFT’s monthly RMB Tracker Report was very positive on its outlook for the Chinese currency stating, “SWIFT believes that the data is positively indicating that RMB internationalisation is increasing by all measures, such as payments, trade, treasury, bank adoption, and offshore clearing centre growth. SWIFT is optimistic about RMB’s journey towards a more international currency…” This comes just after the U.S. last week supported the inclusion of the renminbi into the IMF Special Drawing Rights (SDR) “providing the currency meets the IMF’s existing criteria in its SDR review”.
The IMF review is ongoing but the Executive Board’s final decision on the renminbi’s free usability, required for SDR inclusion, could come as early as next month. In late August, the IMF approved a nine month extension to the current basket until September 2016. Although the release cautions that, “the approved extension of the current basket does not in any way prejudge the outcome of the Review of the Method of Valuation of the SDR” it is clearly a positive signal that preparatory steps are being made. It seems now that the political hurdles have almost been overcome; major players east and west would welcome the inclusion. This will have some influence on the IMF decision but their technicians will keep us in suspense until they have built their argument one way or the other.