The yuan will start trading directly with the pound from Thursday as China seeks to promote the use of the currency in global finance and trade.
The pound will be the fifth major currency that will be exchanged directly with yuan, after the U.S. dollar, the Japanese yen and the New Zealand and Australian dollars. Plans to directly trade the yuan against the pound were first mooted eight months ago, reported Bloomberg News.
“This is an important step in strengthening bilateral economic and trade connections between China and the United Kingdom,” said, the People’s Bank of China on its website. The move will help lower foreign-exchange transaction costs between the two nations, it added.
The PBOC normally sets the daily reference rate for the yuan versus the sterling pound every trading day at 9:15 a.m. in the financial city of Shanghai. The fixing was 10.4413 on Wednesday, compared with 10.4439 on Tuesday, data from the China Foreign Exchange Trade System shows.
The Society for Worldwide Interbank Financial Telecommunications ranks the yuan seventh for global financial transactions, with most of the transactions handled in Hong Kong and Singapore. A proposal to trade the Singapore dollar directly with the yuan was introduced in October last year.
China’s second-biggest bank China Construction Bank will be the first yuan clearing bank in London, which is seeking to cement its position as the direct yuan clearing hub amid stiff competition from Paris, Frankfurt and Luxembourg. HSBC Holdings was chosen by China’s central bank as one of the first market makers for yuan’s direct trading with the pound. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com