Frankfurt Open for Yuan Clearing as Liquidity Rises

Frankfurt became the first financial center in Europe to win the right to clear and settle payments in yuan when the Bundesbank and the People’s Bank of China signed a memorandum of understanding on March 28. The clearing bank makes it easier for German lenders and their clients to access the yuan and cut costs by making euros directly convertible with the Chinese currency without having to be changed into U.S. dollars first.

The yuan is “gaining traction as a trade currency and has in my opinion already reached the level of an investment currency,” Joachim Nagel, a board member at the Bundesbank, said in a speech in Frankfurt today. “It is only a matter of time before the renminbi becomes an international reserve currency,” he said, using another name for the yuan.