China and Singapore will begin direct currency trading on Tuesday, another step toward internationalizing the Chinese renminbi.
The Chinese unit is directly traded with some of the major world currencies including the US dollar, the euro, British sterling, Japanese yen, Australian dollar, New Zealand dollar, Malaysian ringgit and Russian ruble.
The move to include the Singapore dollar is expected to boost bilateral trade and investment, encourage the use of the two currencies in trade and investment settlement and reduce exchange costs for market players, state news agency Xinhua reported Tuesday, citing the China Foreign Exchange Trading System.
It will also help Singapore in its bid to become a renminbi offshore center.
China’s interbank foreign exchange market will kick off direct trading between the yuan and the Singapore dollar via spot, forward and swap contracts.
China and Singapore will be less dependent on the US dollar to settle bilateral trade and investment deals.
Previously, the exchange rate between the two currencies was calculated based on the yuan-US dollar central parity rate and the Singapore dollar-US dollar rate.
Now that the two currencies can be directly traded, the yuan-Singapore dollar rate will be set based on the average prices offered by market makers before the opening of the interbank foreign exchange market, the report said.
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