China will begin trading its yuan currency directly with the Singapore dollar on Tuesday, the national foreign exchange market operator said, in the latest move to promote international use of Beijing’s unit.
The Singapore dollar will be added to the China Foreign Exchange Trade System’s (CFETS) platform, which currently offers transactions between the yuan and 10 foreign currencies, it said Monday.
The market operator will publish a daily parity between the yuan and the Singapore dollar based on quotes from market makers and allow the currency to move three percent on either side of the central midpoint, CFETS said in a statement on its website.
It added the move is intended to “promote the bilateral trade and investment between China and Singapore, facilitate the use of (yuan) and (Singapore dollar) in the cross-border trade and investment settlement (and) meet the needs of economic entities to lower currency conversion cost”.
China has long had direct currency trade with the United States, and in recent years has added the Japanese yen, the Australian dollar, the New Zealand dollar and the Malaysian ringgit.
It started direct exchange with Britain’s pound in June and trade between the yuan and the euro last month.
Direct currency trade marks one of China’s efforts to promote greater use of the yuan, also known as the renminbi.
Beijing keeps a tight grip on the capital account — investment and financial transactions, rather than those related to trade — due to worries that unpredictable inflows or outflows could harm the economy and reduce its control over it.