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China to quote yuan/ringgit onshore next month

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China to quote yuan/ringgit onshore next month
July 18,2010

SHANGHAI: China will start quoting the price of the yuan against the Malaysian ringgit on its domestic foreign exchange market next month in response to growing trade demand, three market sources close to the matter told Reuters.

The exchange rate between the yuan and the ringgit, which is not freely tradable outside Malaysia, will be determined by the rate of the dollar against the yuan in the China Foreign Exchange Trading Centre (CFETC) in Shanghai, the sources said.

The CFETC is an interbank funding centre for banks, insurers, securities brokers and fund management firms. “The technical systems are ready and trading will be launched next month,” one source said.

The news department of the Chinese foreign exchange market declined to comment, and officials from Bank Negara Malaysia, the central bank, were not immediately available for comment.

The yuan is currently quoted against the dollar, euro, yen, Hong Kong dollar and sterling on the CFETC.

China’s central bank publishes a central parity for dollar/yuan every morning that drives the rates of the other currency pairs.

China was Malaysia’s biggest trade partner in 2009 with total trade of $36.3 billion.

Malaysia’s exports to China in the first five months of the year rose 82.2 percent from a year earlier to $19.1 billion.

To allow exporters and importers to settle trade deals in ringgit and yuan, the two countries signed a currency swap agreement in February 2009. reuters

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