For the
first time, China is going to let a major unit other than the dollar swap with
its national currency. Beijing and Tokyo have agreed to start direct trading
within days, with no bucks involved.
The two
Asian economic powerhouses, China and Japan, will begin direct trading of their
currencies from June 1, the governments in Beijing and Tokyo confirmed on
Tuesday. The US dollar as an intermediary currency will no longer be used in
bilateral operations.
"The
move is to promote bilateral trade, facilitate the use of the yuan and the yen
in international trade settlements and lower the cost of conversion," the
China Foreign Exchange Trade System said on Tuesday.
China's
central bank said it would support what it viewed as an important step in
strengthening bilateral cooperation and developing financial markets. The
direct currency trading decision came on the back of preparatory talks between
Chinese Premier Wen Jiabao and Japanese Prime Minister Yoshihiko Noda last
December.
Hedging
against risks
Chinawill
set a daily rate based on dealer quotes, with trade allowed to move within a
3.0-percent band above or below that figure. This compares with a 1.0-percent
band of variance fixed to yuan-dollar trading. No fixed rates will be set in
Tokyo trading, though.
"From
June 1, the yen-yuan exchange rate will be constantly indicated in both
markets, facilitating full-fledged exchange trading," Japan's Finance
Minister Jun Azumi told reporters in Tokyo. "By not using the dollar as an
intermediate currency, we can lower transaction costs and reduce settlement
risks at financial institutions," Azumi added.
Chinais
Japan's largest trading partner, with bilateral trade valued at $345 billion
(275 billion euros). At present, an estimated 60 percent of commerce between
China and Japan is settled in US dollars.
hg/mll (AFP, dpa, Reuters)
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