Asia FX

Yuan now one of world's most tradable currencies

Thomas Ruecker | Flickr | Getty Images

For the first time ever, the Chinese yuan is one of the world's ten most frequently traded currencies, according to a Bank of International Settlements (BIS) survey.

The currency ranked ninth on the bank's top-ten list, jumping eight places from the seventeen spot it held when the survey was last conducted three years ago.

BIS attributes the move to the rapid growth of offshore yuan trading, which boosted the currency's daily turnover by three-and-a-half times since the last survey to $120 billion.

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"The role of the renminbi in global FX trading surged, in line with increased efforts to internationalize the Chinese currency," the BIS said.

However, slow progress in Beijing's financial reforms has sparked doubts about the yuan's increasing popularity.

For over three years, China's financial market reform has been focused on the liberalization of its capital account and increasing the yuan's convertibility but, as analysts from Societe Generale point out in a report, "change has been slow on the domestic front and this has at least partially been responsible for the disorderly development of the shadow banking system."

(Read more: Is it time for China to push the yuan lower?)

Yuan Trading Band to Widen in Near Future
Yuan Trading Band to Widen in Near Future

"Consequently, the domestic financial system has become more fragile, which in turn presents a key obstacle to further capital account liberalization," they added.

For the record, Beijing has been ramping up its efforts to free up cross-border capital flows. Late Thursday, the People's Bank of China announced that they may speed up the loosening of controls on investment flows in and out of the mainland, the nation's most recent step towards a convertible yuan.

"There's clearly been a very active policy by authorities to push the internationalization and it is bearing fruit, but at the same time, we're not going to see renminbi traded directly against the Venezuelan bolivar in the next couple of weeks. It's more about a gradual shift; it's a glacier moving rather than a snowball being thrown," said HSBC's forex strategist Dominic Bunning.

(Read more: Forget China Leaders, Watch This Man for Reforms)

But is financial reform really the top priority for traders?

"Our customer base (fund managers and commodity trading advisors) is always looking for liquid products to add to the mix so if you can get any currency pair that has liquidity, transparency and some volatility, they are happy to add it," said George Dowd, Senior Director at Newedge.

The BIS survey underscored the growing role of emerging market currencies; the Mexican peso re-entered the top-ten list in the eighth position, which, along with the yuan, displaced the Swedish krona and the Hong Kong dollar. The U.S. dollar remained at the top of the pack, while the euro ranked second.

The report also showed continued growth for the foreign exchange market, with average daily turnover reaching $5.3 trillion, an increase of about 35 percent from 2010's $4 trillion figure.

— By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC