China Economy

Yuan and Australian dollar to start direct trading

PUBLISHED : Tuesday, 09 April, 2013, 12:00am
UPDATED : Tuesday, 09 April, 2013, 4:24am

China will start direct trading between the yuan and the Australian dollar from tomorrow, according to Australian Prime Minister Julia Gillard.

The South China Morning Post had reported yesterday that direct trading would be allowed soon.

Australia & New Zealand Bank and Westpac Banking had been approved by the People's Bank of China as market makers for the direct trading of the currencies, Gillard said in Shanghai yesterday. "This will be a huge advantage for Australia, not only for our big businesses, but also for our small and medium enterprises that want to do business here," she said.

A formal announcement of the plan, which will see the Australian dollar become the third major currency allowed to have direct trading links with the yuan, would be made today, she said.

China remained Australia's top trading partner in February, with transactions at A$9.7 billion (HK$78.1 billion). China took about a third of Australia's exports that month and is the major customer for iron ore and coal.

The PBOC sets a daily reference rate for the yuan against the Australian dollar, based on market-maker prices. Direct trading means the fixing will be computed without involving a cross rate with the dollar.

Direct trading would lower customers' costs by "a few basis points", ANZ chief executive Mike Smith said in Shanghai.

"The effect is the convenience of being able to do this," he said. "For example, in a trade document, rather than going through the US dollar and having the movement of the currency over time, you can immediately lock in the exchange rate."

Premier Li Keqiang took office last month and retained Zhou Xiaochuan as central bank governor, a vote of confidence in policies that include promoting the usage of yuan in global trade and finance. Zhou is seeking to reduce reliance on the US dollar, as China has accumulated US$3.3 trillion of foreign-exchange reserves, the world's largest.

The yuan climbed to a 19-year high of 6.1986 against the greenback on April 2, prices from the China Foreign Exchange Trade System show.

It was the 14th most-used currency in global payments in February, according to the Society for Worldwide Interbank Financial Telecommunication. It had a 0.6 per cent share, figures from the financial messaging platform show.

The yuan-aussie direct trading was "an important step in the process of internationalising the renminbi", said Neville Power, the chief executive of Fortescue Metals. "Going forward, I see more opportunities to do direct trading in the renminbi."