At a conference in Singapore, the CEO of the London Metals Exchange (LME), the world hub for metals trading, said that LME is working on a 2-year project to create its own clearing house and that the group is considering adopting the Chinese yuan as a means of settlement once the project is launched. LME currently accepts US dollars, euros, Japanese yen, and British pounds to settle contracts.
Adding the yuan would recognize the fact that China is the world’s largest consumer of the metals contracted at LME — copper, aluminum, zinc, lead, nickel, and tin. For China the adoption of the currency would be a major step in the country’s goal of internationalizing the yuan. Last month the government widened the fixed trading band on the yuan, but among the policy changes remaining is removing the restriction on foreign ownership of China’s currency.
According to a report at MarketWatch, market participants have supported the proposed move, although LME’s CEO said, “It’s like asking people if they’d like world peace or a pony for Christmas. Obviously [the answer is] yes.”