The People's Bank of China said on Monday that it is allowing direct trading
between the yuan and the Swiss franc, in an attempt to facilitate bilateral trade
and investment.
The two currencies can be traded directly on the China Foreign Exchange Trade System - the interbank-trading and foreign-exchange division of the PBoC, the central bank said in a statement. In a separate paper, the PBoC’s trading arm said that direct trading between the yuan and Swiss franc would officially start on Tuesday.
Before the decision, the currencies could be exchanged through the U.S. dollar, which could add to transaction costs.
The central bank said the measure will help save foreign-exchange costs and widen the use of the two currencies in trade and investment between the two countries.
China’s yuan is already traded
directly against the U.S. dollar, the British pound, the Australian and
New Zealand dollars, the Japanese yen and the Russian ruble.
This year, China's central bank extended Switzerland a 50 billion yuan ($7.9 billion) quota under the Renminbi Qualified Foreign Institutional Investor program, which allows yuan raised offshore to be used to purchase securities in China’s domestic markets. In 2014, the Swiss and Chinese central banks signed a three-year currency-swap agreement that allows to borrow as much as 150 billion yuan.
Yesterday's decision by the PBoC comes as the International Monetary Fund braces to meet this month to review its Special Drawing
Rights. The executive board of the Washington-based body will judge if the yuan matches the criterion of being
"freely usable," after rejecting its bid in 2010.
