“We are pleased to be able to help our members take advantage of the opportunities arising from the renminbi’s internationalization”, Trevor Spanner, chief executive of LME Clear, said in a statement.
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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.
There are now five currencies used at the LME: US dollars, euro, British pounds, Japanese yen and offshore renminbi.
The move follows regulatory approval by the Bank Of England, said LME, owned by Hong Kong Exchanges and Clearing (0388).
The initiative comes in response to calls from LME Clear members to extend the list of accepted cash collateral to include CNH. With China the world’s largest consumer and producer of most metals, more Chinese companies have been using the LME to trade commodities and hedge their exposure to fluctuating prices. “The yuan will not rise much in the short term”, said a trader at a Chinese city commercial bank in Shanghai.
BOCI will be the first member to submit offshore yuan as collateral, the LME said.
“This demonstrates the commitment of BOC to develop itself as a truly global bank”, Huabin Wang, deputy general manager at Bank of China’s London branch, told the Financial Times. The People’s Bank of China (PBOC) set the midpoint rate at 6.1150 per dollar prior to market open, 0.01 percent firmer than the previous fix at 6.1154.
China is pushing for the yuan to be included in the worldwide Monetary Fund’s currency basket known as Special Drawing Rights, this year.
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London, Paris and Frankfurt are all competing to become the offshore renminbi trading centre as interest grows in the payments sector.
