Australia part of China’s road to RMB internationalisation
(10 April 2013 – China) As Australia becomes the third country in the world to trade its currency directly with the renminbi (RMB) or yuan, China’s move is predicted to deepen financial links between the two countries and make the A$120 billion-per-year trade relationship more efficient.
Westpac’s Singapore-based currency strategist, Jonathan Cavenagh said the deal would save exporters money on transaction costs.
In the longer term, it will also give exporters more opportunity to invest in a range of yuan-denominated products as China opens up its financial system.
Exporters who are paid in yuan, for instance, would have the option of investing in ''dim sum bonds'' - RMB-denominated products traded in Hong Kong.
''This is a continuing part of China's long road to RMB internationalisation. They are trying to encourage market participants to use RMB,'' he said.
Westpac and ANZ are the first two banks that will be able to offer a direct conversion between the two currencies, which must now be completed in a roundabout process via the United States dollar.
Commonwealth Bank is applying for a licence so it can trade the two currencies directly, and it's understood National Australia Bank is making the same move.
In the longer term, it will also give exporters more opportunity to invest in a range of yuan-denominated products as China opens up its financial system.
Exporters who are paid in yuan, for instance, would have the option of investing in ''dim sum bonds'' - RMB-denominated products traded in Hong Kong.
''This is a continuing part of China's long road to RMB internationalisation. They are trying to encourage market participants to use RMB,'' he said.
Westpac and ANZ are the first two banks that will be able to offer a direct conversion between the two currencies, which must now be completed in a roundabout process via the United States dollar.
Commonwealth Bank is applying for a licence so it can trade the two currencies directly, and it's understood National Australia Bank is making the same move.
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