SHANGHAI -- China and Japan have agreed to start direct trading of their currencies from June 1 as Beijing moves toward making the yuan more of a global currency.
Until now, China has only allowed direct trading between the yuan and the U.S. dollar, under tight limits that have been loosened only gradually.
The People's Bank of China said on May 29 that it had authorized the move to help improve the foreign exchange market, promote Sino-Japanese cooperation and develop China's capital markets.
China has long pledged to loosen tight controls on its currency. The move to allow direct trading of the yen and the yuan is a step in that direction which will also streamline foreign exchange dealings between China and Japan, the world's second and third-biggest economies.
The China Foreign Exchange Trade System said in a notice that the exchange rate for yuan and yen would be based a weighted average of prices given by market makers, excluding the highest and lowest offers. A similar arrangement applies to the yuan-dollar exchange rate.
The yuan-yen exchange rate listed by the State Administration of Foreign Exchange on Tuesday was 7.948 yuan to 100 Japanese yen, or 12.58 yen per 1 yuan.
China has recently taken several steps to promote the yuan's use internationally.
Last month, the central bank announced it would allow the yuan to rise and fall by a slightly wider margin against the dollar in daily trading -- up to 1 percent each day from 0.5 percent previously.
Hong Kong's stock exchange operator also recently announced it plans to launch a futures contract denominated in yuan in another step toward internationalizing China's currency.
The contract, to be launched later this year, would give investors a way to hedge their exposure to the yuan, which is also known as the renminbi.
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