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Money

Yuan begins trading against the rouble

By Judy Chen (China Daily)
Updated: 2010-11-23 09:50
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SHANGHAI - China started allowing the yuan to trade against the Russian rouble in the interbank market from Monday as policymakers promote the currency's use in global trade and finance.

The move will help "facilitate bilateral trade between China and Russia and help develop yuan trade settlements," according to a statement published on the website of the China Foreign Exchange Trade System (CFETS), a subsidiary of the People's Bank of China.

The central bank calculates the daily reference rate by taking an average of quotes from commercial banks designated to act as market makers, the statement said.

"The pace of internationalizing the yuan is accelerating," said Zhao Qingming, a senior analyst in Beijing at China Construction Bank Corp, the country's second-largest lender.

"The direct trading between the yuan and the rouble will help expand trade settlements in the two currencies."

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China is allowing greater use of its currency for cross-border transactions to reduce reliance on the US dollar, after Premier Wen Jiabao said in March he was "worried" about holdings of assets denominated in the greenback. Purchases of US currency to contain yuan gains contributed to a $194 billion increase in the nation's foreign-exchange reserves in the third quarter, boosting the total to a record $2.65 trillion.

The rouble traded at 4.6711 per yuan as of 9:59 am in Shanghai, according to CFETS data. The reference rate, which is published at around 9:15 am every day, was set at 4.6711 per yuan. The yuan is allowed to trade 5 percent on either side from the fixing, according to the CFETS statement.

China started allowing the Malaysian ringgit to trade against the yuan on Aug 19. Traders can also buy and sell the yuan against the dollar, the euro, the yen, the Hong Kong dollar and the British pound.

The yuan was little changed at 6.6375 per dollar, from 6.6395 on Nov 19. The rouble was stable at 30.9912. The value of international trade transactions settled in the Chinese currency totaled 126.5 billion yuan ($19 billion) in the third quarter, 160 percent more than in the three months through June, the People's Bank of China reported on Nov 2.

China first approved yuan use for trade settlement in July 2009 and Zheng Yang, an official at the People's Bank of China's Shanghai branch, on Sept 27 said the value of such transactions may reach 200 billion yuan by the end of this year. The total for the first nine months was 197.1 billion yuan.

CFETS also said it will consider allowing trading in forwards and swaps between the yuan and the rouble, adding that any decision will be based on market demand.

Bloomberg News

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