The dollar-offshore yuan pair is likely to move to second place behind just the euro-dollar when the Bank for International Settlements releases its next triennial survey of foreign exchange and over-the-counter derivatives markets in 2028, said Andrew Batchelor, head of the clearing house’s unit LCH ForexClear.
“Yuan internationalisation is real,” Batchelor said in an interview in Shanghai. “It’s not necessarily about replacing the dollar. It’s about diversifying currency usage. Markets want choice: the ability to trade and transact in different currencies.”
All of the banks that are trading significant amounts of euro-dollar or dollar-yen foreign-exchange options would welcome the ability to clear their dollar-offshore yuan options with LCH as well, Batchelor said.
The yuan’s use in worldwide financial markets has been increasing in recent years as China’s economy has grown and the government has introduced a number of measures to support the currency’s globalisation.
There’s currently a “golden window” for promoting the yuan’s internationalization as US policies have weakened the dollar’s credibility, former People’s Bank of China Governor Zhou Xiaochuan said this month.
The global daily average volume of foreign-exchange options using the yuan was $82 billion, according to the most recent BIS survey published last year. That compared with $102 billion for the yen and $236 billion for the euro, for the survey period.More broadly, the yuan made up 8.5% of global currency transactions including spot, forwards, swaps and options, based on the survey, up from 7% in 2022. The dollar accounted for 89%, the euro for 28.9%, the yen 16.8%, and the pound 10.2%.
Specifically for foreign-exchange option transactions, the BIS report shows the yuan’s daily average volume was $82 billion during the survey period, compared with $102 billion for the yen and $236 for the euro, based on the BIS report.
The yuan’s use is being boosted by a number of factors, including increased real-economy trade and cross-border flows, Batchelor said. Other drivers are stronger risk-management needs arising from international markets and growing participation by non-banks seeking trading opportunities in the currency, he said.
Use of both the dollar and the yuan has been bolstered by the Middle-East conflict. The proportion of international transactions in the dollar rose to a record 51.1% in March, according to global financial messaging service Swift. Meanwhile, China’s cross-border yuan payment system CIPS saw its largest ever single-day volume in early April.
BloombergChinese Bonds
The London-based clearing house is also seeking to bolster the use of Chinese government bonds as collateral in global transactions, Batchelor said. LCH began accepting Chinese debt denominated in euros and dollars as eligible non-cash collateral through EuroClear in 2025.
LCH is now planning to extend this to Chinese government bonds denominated in the offshore yuan by early in the third quarter of 2026, Batchelor said. The clearing house will then potentially introduce offshore yuan Chinese bond settlement through its Hong Kong partner CMU OmniClear Ltd. next year, he said.
There’s significant potential to use Chinese government bonds as collateral globally as the nation’s banks hold a substantial amount of these securities, and they are increasingly externalizing positions to diversify their portfolios, Batchelor said.
