China and Japan will start direct trading of their currencies on June 1 in a move that could help strengthen the financial ties between the two largest Asian economies.
The People's Bank of China on Tuesday said that the China Foreign Exchange Trade System, or CFETS, will launch direct trading between the yuan and yen on the inter-bank foreign exchange market and improve the trading mode between the currencies.
In effect, from now on the two countries, will not be using the US dollar as the intermediate currency
The PBoC said in a statement that the development of yen-yuan direct trading will contribute to the formation of direct exchange rate between the two currencies. "This will help lower currency conversion cost for economic entities and facilitate the use of the currencies in bilateral trade and investment."
This will also promote the financial cooperation and enhance economic and financial ties between the two countries, the bank said.
In December last year, the leaders of the two countries agreed to strengthen cooperation in developing financial markets and mutually promoting direct trading between the two currencies based on market principle.
China has signed a series of bilateral currency agreements with foreign countries, including Turkey and Australia, as part of efforts to promote the global use of the yuan in cross-border trade and investment.
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