Japan, China shun USD by direct currency trading

Japan and China said Tuesday they will start direct currency trading this week, marking the first time Beijing has let a major unit other than the dollar swap with the yuan. The move, which will scrap the greenback as an intermediary unit, comes as China introduces measures as part of a long-term goal to internationalise its currency, and rival the dollar as benchmark. The yuan-yen trade -- part of a wider deal reached last year between Beijing and Tokyo -- will also be allowed to move in a wider range than the narrow band at which the dollar and yuan change hands, Dow Jones Newswires and the Nikkei business daily reported. China will set a daily rate based on dealer quotes with trade allowed to move within a 3.0 percent band above or below that rate, the reports said, compared with a 1.0 percent band fixed to the yuan-dollar. The Chinese central bank earlier Tuesday introduced a rate of 7.9480 yuan for every 100 yen, Dow Jones Newswires said.

"Japan and China said Tuesday they will start direct currency trading this week, marking the first time Beijing has let a major unit other than the dollar swap with the yuan"The new system, which starts on Friday, makes way for "full-fledged direct exchange trading," Japan's Finance Minister Jun Azumi said Tuesday. By not using the dollar as an intermediate currency "we can lower transaction costs and reduce settlement risks at financial institutions as well as making both nations' currencies more useful", he added