Direct bank trading of renminbi and Australian dollar imminent

Test run of direct trading at banks currently ongoing.

China might soon allow the renminbi to start direct trading with the Australian dollar in Australia. This move will bypass the U.S. dollar when exchanging the units in order to take advantage of growing financial and trading ties between two countries.

The move is also aimed at reducing transaction costs and boosting liquidity for the exchange rate. It is part of China’s long-term effort to promote the renminbi’s status as a currency for international trade and finance.

China Foreign Exchange Trade System has been conducting a test run of the planned direct trading of the two currencies in its system in recent weeks.

When direct trading comes about, authorities in both countries will appoint 10 banks as market makers for the pair, including several major Chinese banks and counterparts from Australia and other countries.

China introduced the renminbi-Australian dollar exchange rate to its onshore currency market in November 2011 but trading of the pair has mostly been done indirectly through the popular U.S. dollar due to thin interest and the absence of market makers.