China commences direct trading between renminbi and Singapore dollar

Last week China’s Foreign Exchange Trading System (CFETS) announced direct trading between the renminbi and Singapore dollar, marking another step toward internationalising the Chinese currency. The move is also expected to help Singapore become a renminbi offshore centre.

China commences direct trading between renminbi and Singapore dollar

Last week China's Foreign Exchange Trading System (CFETS) announced direct trading between the renminbi and Singapore dollar, marking another step toward internationalising the Chinese currency. The move is also expected to help Singapore become a renminbi offshore centre.

As a result of this the yuan's list of direct trade extends to more major currencies, including the US dollar, the euro, British pound, Japanese yen, Australian dollar, New Zealand dollar, Malaysian ringgit and Russian ruble.

The move aims to boost trading and investment, while enabling the use of the two currencies in trade and investment settlement and reduce exchange costs for traders, the CFETS said in a statement on its website. With direct trading of their currencies, China and Singapore will be less dependent on the US dollar to settle trade and investment deals. Previously, the exchange rate between the two currencies was calculated based on the yuan-US dollar central parity rate and the Singapore dollar-US dollar rate.

The People's Bank of China (PBOC), the central bank, welcomed the change, saying that the Chinese and Singaporean governments will advance bilateral and economic relations. They also issued a statement on their website stating "The direct yuan-Singapore dollar trade is good for forming a direct exchange rate between the two currencies and reducing exchange costs".


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