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Andy Seaman By Beverly Chandler, Opalesque London:

May saw China and Australia agree a deal to directly trade the Australian dollar and the renminbi. Andy Seaman, Partner and Portfolio Manager, Stratton Street, explains that this means that rather than foreign exchange between the two countries going via US dollars, the currencies can be directly converted, something that previously was only possible with the renminbi and the yen. The Reserve Bank of Australia, Australia’s central bank, is the first to sign up and has put 5% of its foreign exchange reserves into the renminbi.

Seaman explains that this might have come as a surprise to people in the markets here but other central banks are queuing up to do just the same. "This is a trend that will continue" he says, with the Banque de France and the Bank of England also keenly creating links with China, albeit constrained on what they can do with their foreign exchange reserves.

"The renminbi has come from nowhere" Seaman explains but by 2015 it is predicted to have a trading volume of $1tln a day and be standing at number three in the world’s most actively traded currencies. Globally, 12% of China's trade is now settled in renminbi. "If recent initiatives are able to boost trade in renminbi to match either the current - 12% - level of trade settled in renminbi seen other parts of the world, or approach the one third level within a few years, then ......................

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