Yuan To Yen Direct Trading Hits Market
Direct currency trading between Asia’s largest economies, China and Japan, has started, further minimizing reliance on the US dollar. The US dollar is the official currency for America and associated overseas territories, and is utilized in the majority of FX transactions. The Japanese Yen is now the only currency aside from the US dollar which can be traded versus the Chinese yuan.
Jun Azumi, the Japanese Finance Minister, announced this decision in Tokyo and advised on the benefits behind the decision, including reduced transaction fees due to narrowed bid-ask spreads and decreased settlement risks. The People’s Bank of China likewise confirmed that Japan and China would begin direct currency trading in Tokyo and Shanghai beginning today. This is also seen as a step toward raising the international role of the Chinese yuan. China's aim appears to be to eventually turn the yuan into a major global currency.
This move could potentially see the yuan accepted by some Japanese investors and increase the likelihood of the currency becoming internationally-settled. This move could also strengthen links between the major Asian trading partners. The new currency pair is traded under the JPY/CNY code and is not available on the mainstream retail forex broker platforms yet . Yen/yuan usage would need to increase significantly before the dollar trading reliance was impacted; nonetheless, the longer-term dependency on the US dollar could be affected.
The Japanese yen has outperformed versus other currency majors this week as risk aversion has dominated. The USD/JPY has dropped 2.13% on the weekly basis.