When a currency gets hot, people rush to get a hold of it: expert

For the first time, the Chinese renminbi has become one of the top 10 most-traded currencies and its climb has been due to growth in offshore trading, according to a survey by the Bank for International Settlements.

The renminbi was the 9th most-actively traded currency this year in BIS's latest survey, jumping from 17th in 2010 and 20th in 2007. The currency accounted for a 2.2 percent share of global foreign-exchange volumes, according to the report.

It placed just above the New Zealand dollar and the renminbi's entrance into the top 10 pushed the Hong Kong dollar and Swedish krona to spots 13 and 11, respectively. The US dollar continues to be the dominant global currency, accounting for 87 percent of global-trading volumes, increasing 2 percentage points since 2010. The US dollar is followed by the euro at 33.4 percent and the yen at 23 percent of global-trading volumes.

The BIS survey done in April reported that the renminbi "saw the most significant rise in market share among major emerging market currencies," with the currency's turnover increasing from $34 billion to $120 billion.

"The role of the renminbi in global FX trading surged, in line with increased efforts to internationalize the Chinese currency," said the BIS, which sees an average of $5.3 trillion in daily global currencies trading.

The ability to settle cross-border trade transactions with the renminbi is leading to tremendous growth in just a few years since the People's Bank of China and the State Administration of Foreign Exchange first allowed renminbi trade settlements.

"As the currency continues to be more widely used for trade settlement, investment flows and reserve management, the volumes for RMB will continue to grow. We see regular evidence of this in our discussions with corporate and institutional clients globally," said Apratim Chakravarty, head of Asian product distribution of HSBC in New York City. "We are still some distance away from this trend peaking."

Chakravarty predicted that in the next two to three years, about one-third of China's trade will be settled in the renminbi, up from the 16 prcent in the first half of 2013, according to data gathered by the People's Bank of China and HSBC.

The renminbi's strength is coming at a time when investors are responding to the currency's appreciation.

"When people think there's going to be strong appreciation of the renminbi, they're eager to get a hold of the currency," says Nicholas Borst, research associate at the Peterson Institute of International Economics. "The primary driver is taking advantage of the currency appreciation."

In a separate report mirroring a similar trend for the renminbi, Western Union, a global payment service, reported a growing renminbi demand with its client transactions. In the US alone, renminbi transactions accounted for almost 12 percent of all payments to China in the first half of 2013, Western Union said Wednesday.

"Businesses around the world are becoming more aware of RMB internationalization and the benefits that trading in the local Chinese currency can create for all parties," said Raj Agrawal, president of Western Union Business Solutions.