Reserve Bank and People's Bank of China agree deal
Published: 5:55PM Monday April 18, 2011 Source: Business Desk
The Reserve Bank of New Zealand has agreed to a reciprocal currency arrangement with the People's Bank of China to support the settlement of trade deals in the Chinese currency, the renminbi.
The swap facility is 25 billion renminbi (NZ$5 billion) and has a three-year maturity, with the option to extend, the Reserve Bank said in a statement.
It will allow the RBNZ to borrow renminbi at times when financial market disruptions makes it difficult for firms to obtain the Chinese currency to settle transactions.
China was New Zealand's second-largest export market in the 12 months through February, taking $5.2 billion worth of New Zealand's merchandise trade. It was the second-largest source of imports after Australia, with trade valued at $6.9 billion in the latest period.
"While there is no need to use the facility right now, it is useful to have this capacity if markets were ever to become dysfunctional," said Reserve Bank deputy governor Grant Spencer.
"In addition the signing of this swap line contributes to building the China-NZ relationship."
The RBNZ said eight other countries, mainly in Asia, have swap facilities in place with China's central bank.
Published: 5:55PM Monday April 18, 2011 Source: Business Desk
The Reserve Bank of New Zealand has agreed to a reciprocal currency arrangement with the People's Bank of China to support the settlement of trade deals in the Chinese currency, the renminbi.
The swap facility is 25 billion renminbi (NZ$5 billion) and has a three-year maturity, with the option to extend, the Reserve Bank said in a statement.
It will allow the RBNZ to borrow renminbi at times when financial market disruptions makes it difficult for firms to obtain the Chinese currency to settle transactions.
China was New Zealand's second-largest export market in the 12 months through February, taking $5.2 billion worth of New Zealand's merchandise trade. It was the second-largest source of imports after Australia, with trade valued at $6.9 billion in the latest period.
"While there is no need to use the facility right now, it is useful to have this capacity if markets were ever to become dysfunctional," said Reserve Bank deputy governor Grant Spencer.
"In addition the signing of this swap line contributes to building the China-NZ relationship."
The RBNZ said eight other countries, mainly in Asia, have swap facilities in place with China's central bank.