| SHANGHAI, April 3
SHANGHAI, April 3 China and Australia will
launch direct trading between the two currencies in Shanghai and
Sydney within weeks to lower trade transaction costs, a foreign
bank source with direct knowledge of the matter told Reuters on
The new currency deal will eliminate the spread between U.S.
dollars and Australian dollars from the cost of
converting between the yuan and the Aussie dollar.
China has launched other new currency pairs in recent years
, including with the Canadian dollar, Malaysian
ringgit, and Hong Kong dollar, but the exchange rates for these
pairs are still calculated based on the corresponding U.S.
The countries will announce the move on Friday during the
visit of Australian Prime Minister Julia Gillard to China, which
will begin at the Boao Forum for Asia on China's Hainan island.
Direct trading will begin soon after the announcements and
no later than the first half of this year, the foreign bank
"Considering heavy flows of mining transactions between
China and Australia, the launch of direct Australian dollar-yuan
trading will be significant move to reduct costs of both sides
of mining trade."
China is Australia's biggest trading partner, with combined
two-way trade of $120 billion.
Even after direct AUD/CNY trading is launched, corporates
may still find it cheaper to conduct trades through the U.S.
dollar, since liquidity will be much greater.
The two countries' central banks signed a bilateral currency
swap worth A$30 billion or 200 billion yuan ($32.27 billion)
last March, but the facility has never been used.
The launch of the new Australian dollar-Chinese yuan
currency trading pair is another small step in China's campaign
to increase international use of its yuan.
"For China alone, it will also be a major step towards
regionalising and eventually internationalising the yuan by
making the yuan direct tradable with major global currencies,"
the banking source said.
Japan and China launched direct yen-yuan trading in a
similar agreement last June. The yen is
currently the only currency other than the US dollar with which
the yuan trades directly.
The Chinese yuan is not fully convertible under the
capital account, but China has moved aggressively to promote
yuan internationalisation in recent years.
The measures include enabling China-based firms to settle
foreign trade in yuan, promoting foreign direct investment using
yuan, and the launch of officially-sanctioned offshore yuan
trading in Hong Kong and Taiwan.
The Australian newspaper previously reported the planned
announcement without naming sources.
A spokesman for the China Foreign Exchange Trading System,
which oversees China's onshore forex market, declined to comment
and the People's Bank of China did not respond to faxed
questions. The Reserve Bank of Australia, Treasury department
officials and the Treasurer's office all declined to comment.
($1 = 6.1986 Chinese yuan)
(Additional reporting by Rob Taylor in CANBERRA; Editing by