Swift has released figures showing that the third biggest currency in the global issuance of letters of credit (L/Cs) by value is now the renminbi (RMB).

The Chinese currency has usurped the Japanese yen as the third most used currency in global L/C issuance according to the global payments network.

Market positions

The value of RMB-denominated L/Cs is now more than half the value of those denominated in euros according to Swift.

But with a share of 4 per cent of the market, RMB denominated L/Cs have a long way to go to catch up those denominated in US dollars, which have an 84.4 per cent share of the market.

Driving forces

Some of the increase in RMB-denominated L/Cs may be a result of countries such as India relaxing overseas borrowing rules.

Amongst other things, this allows firms to raise RMB-denominated debt in order to leverage the low cost of capital offered by the Chinese currency.

Asian countries meanwhile are experiencing high inflation levels, which may be another reason for increases in the use RMB-denominated products in that region.

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