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Is Renminbi a (Truly) International Currency? An Evaluation Based on Offshore Foreign Exchange Market Trading Patterns

Author

Listed:
  • Cheng, Lian
  • Luo, Junru
  • Liu, Lin

Abstract

This article provides a new framework to evaluate the status of Renminbi internationalization. It proposes that the trading patterns of a currency in global foreign exchange market embody the currency’s position in the international monetary system. Based on foreign exchange trading data provided by CLS Group, the article constructs a ranking of major international currencies including Renminbi. It finds that Renminbi shares more similarities in foreign exchange trading patterns with the established global currencies like US dollar and Euro than with those regional currencies. The article also explores the policy implications that the new evaluation approach provides.

Suggested Citation

  • Cheng, Lian & Luo, Junru & Liu, Lin, 2018. "Is Renminbi a (Truly) International Currency? An Evaluation Based on Offshore Foreign Exchange Market Trading Patterns," MPRA Paper 89279, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:89279
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    File URL: https://mpra.ub.uni-muenchen.de/89279/1/MPRA_paper_89279.pdf
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    References listed on IDEAS

    as
    1. Hartmann,Philipp, 2007. "Currency Competition and Foreign Exchange Markets," Cambridge Books, Cambridge University Press, number 9780521046930.
    2. Schreiber, Ben Z., 2014. "Identifying speculators in the FX market: A microstructure approach," Journal of Economics and Business, Elsevier, vol. 73(C), pages 97-119.
    3. Menzie Chinn & Jeffrey A. Frankel, 2007. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 283-338, National Bureau of Economic Research, Inc.
    4. Yin-Wong Cheung, 2014. "The Role of Offshore Financial Centers in the Process of Renminbi Internationalization," Macroeconomics Working Papers 24049, East Asian Bureau of Economic Research.
    5. Dong He & Robert N. McCauley, 2010. "Offshore Markets for the Domestic Currency: Monetary and Financial Stability Issues," Working Papers 1002, Hong Kong Monetary Authority.
    6. Cetorelli, Nicola & Peristiani, Stavros, 2013. "Prestigious stock exchanges: A network analysis of international financial centers," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1543-1551.
    7. Lukas Menkhoff & Lucio Sarno & Maik Schmeling & Andreas Schrimpf, 2016. "Information Flows in Foreign Exchange Markets: Dissecting Customer Currency Trades," Journal of Finance, American Finance Association, vol. 71(2), pages 601-634, April.
    8. Yulu Chen & Bo Hu, 2013. "Internationalization of the RMB: An Evaluation Framework," Economic and Political Studies, Taylor & Francis Journals, vol. 1(1), pages 5-20, January.
    9. Moore, Michael J. & Payne, Richard, 2011. "On the sources of private information in FX markets," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1250-1262, May.
    10. Batten, Jonathan A. & Szilagyi, Peter G., 2016. "The internationalisation of the RMB: New starts, jumps and tipping points," Emerging Markets Review, Elsevier, vol. 28(C), pages 221-238.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Marinakis, Yorgos D. & White, Reilly & Walsh, Steven T., 2020. "Lotka–Volterra signals in ASEAN currency exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).

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    More about this item

    Keywords

    RMB; Foreign Exchange Market; Trading Pattern; Network;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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