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Yuan takes another global step
By Feng Jianmin |
November 29, 2011, Tuesday
|
Print Edition
Print Edition
THE yuan started trading against the Australian dollar and Canadian dollar in China's foreign exchange market yesterday, a move observers said may accelerate the Chinese currency's internationalization by promoting its use in cross-border trading.
Banks can now trade the two currencies against the yuan directly unlike previously when they had to first convert them into the US dollar before being changed into the yuan.
Australia and Canada are both major producers of the commodities that have powered China's rapid economic growth, and economists said direct trading may cut risks in exchange rate fluctuations and help stabilize commodity prices and smooth trading procedures.
"China has large demand for resources and is sensitive to commodity price (movements)," said Charlie Cheng, senior vice president of the investment banking division of CMB International Capital. "It is necessary to allow direct trading in these two currencies."
But the yuan was thinly traded against the two currencies yesterday, Chang Wenjuan, a trader with the Bank of China, said.
On the spot market, the two currencies can trade within 3 percent of their daily central parity rates set by the central bank, said a statement. The range is wider than the 0.5 percent currently set for trading between the yuan and the US dollar.
The People's Bank of China yesterday set the central parity rates at 6.2491 yuan per Australian dollar and 6.1048 yuan to the Canadian dollar.
Economists believed China should expand the range of tradable currencies to cover all the country's major trading partners to facilitate trading activities and widen the yuan's use globally. The yuan's global status has been rising recently helped by China's relatively strong economic growth and its efforts to facilitate investment and trading with the currency.
The two currencies join the US dollar, the euro, the pound, the yen, the Hong Kong dollar, the Russian ruble and the Malaysian ringgit that can be traded directly against the yuan.
Banks can now trade the two currencies against the yuan directly unlike previously when they had to first convert them into the US dollar before being changed into the yuan.
Australia and Canada are both major producers of the commodities that have powered China's rapid economic growth, and economists said direct trading may cut risks in exchange rate fluctuations and help stabilize commodity prices and smooth trading procedures.
"China has large demand for resources and is sensitive to commodity price (movements)," said Charlie Cheng, senior vice president of the investment banking division of CMB International Capital. "It is necessary to allow direct trading in these two currencies."
But the yuan was thinly traded against the two currencies yesterday, Chang Wenjuan, a trader with the Bank of China, said.
On the spot market, the two currencies can trade within 3 percent of their daily central parity rates set by the central bank, said a statement. The range is wider than the 0.5 percent currently set for trading between the yuan and the US dollar.
The People's Bank of China yesterday set the central parity rates at 6.2491 yuan per Australian dollar and 6.1048 yuan to the Canadian dollar.
Economists believed China should expand the range of tradable currencies to cover all the country's major trading partners to facilitate trading activities and widen the yuan's use globally. The yuan's global status has been rising recently helped by China's relatively strong economic growth and its efforts to facilitate investment and trading with the currency.
The two currencies join the US dollar, the euro, the pound, the yen, the Hong Kong dollar, the Russian ruble and the Malaysian ringgit that can be traded directly against the yuan.
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