The move allows the Australian dollar and the yuan to be directly swapped without using the US dollar as an intermediary currency, making foreign trade settlement more convenient and cutting transaction costs.
The Australian dollar was quoted at 6.5118 yuan at midday Wednesday on China’s national foreign exchange market.
Australian Prime Minister Julia Gillard announced the move in a speech on Monday while on an official visit to China.
China, the world’s number two economy, is Australia’s largest trading partner according to Canberra, spending billions on resources it needs to fuel its growth, while Australia is China’s seventh largest partner.
The China Foreign Exchange Trade System said late Tuesday that direct trading would “promote bilateral trade and investment between China and Australia”.
China’s foreign exchange market started direct trading between the yuan and Japanese yen in June last year, while the US dollar is also directly traded with the Chinese currency.
Australia and New Zealand Banking Group, one of the market makers for the new trade, called the move a “milestone”, saying it would push forward convertibility of the yuan, according to a research report.
But Zhang Jianping, a researcher at China’s Institute of International Economic Research, called for more government efforts to make the yuan a global currency by reaching more such agreements with trading partners.
“It will be a long time before the (yuan) can become a major international currency,” he told the China Daily newspaper.