Peter Zoellner, head of the banking department at the central banks'
central bank, also told one of the year's biggest gatherings of
foreign exchange dealers that the role of China's renminbi would
continue to grow.
He said there were signs that moves by Beijing to weaken the yuan
and end a decade of constant appreciation were pushing some
interests towards its tightly controlled onshore market and that
this might develop further in coming months.
He expected trading and central bank reserves held in the yuan to
continue to expand "at a sustained pace" but saw no prospect that
the Chinese currency could replace the dollar as the reserve of
choice over the next couple of decades.
"It could happen that the percentage will go slightly down with the
reserve currency from between 65 and 70 maybe to between 50 and 60
percent," he told the ACI Financial Markets Association congress in
"But the relative dominance of the United States dollar I do not
believe that this will change for the next 10, 20 years."
Shifts in currency allocations by central banks, many of whom
decline to publish breakdowns of how much they hold in reserves in a
particular currency, are closely-watched by foreign exchange
BIS is the biggest repository for data on volumes, movements and
trade in currencies worldwide. Its triennial survey last year showed
volumes of trading had risen to an average of $5.3 trillion a day.
Zoellner said the expansion of yuan offshore trading was one factor
behind that rise and said he expected China's recent moves to prompt
further change in how its currency regime, tightly controlled until
[to top of second column]
"Most of the transactions over the last few years have been done in
the offshore markets... but there is more and more activity in the
domestic market in renminbi, quotas have been increased and so on,"
The moves by China, mainly carried out by shifting its onshore
reference rate for the yuan against the dollar steadily weaker, has
driven a surge in yuan trading offshore and an almost 3 percent fall
in the value of the yuan against the dollar, putting an end to one
of the currency world's few sure bets for steady appreciation.
"The Chinese authorities are doing something to break that
expectation of low volatility and one way direction. This encouraged
some of the speculative (investors) to do their short term trades in
China," Zoellner said.
"We will see how this works out, it has to be observed for the next
couple of months."
(Editing by Elaine Hardcastle)
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