StanChart launches dirham-yuan direct trading

Chinese move to allow yuan's direct trading pair with dirham was in anticipation of a remarkable surge in bilateral trade and tourism ties.

Standard Chartered Bank (China) Co Ltd announced on Thursday the launch of direct trading business for Chinese currency with the UAE dirham and Saudi riyal and claimed that it became the first batch of direct trading market-makers for yuan against the two Gulf currencies in China's inter-bank forex market.
Last week, China agreed to establish a direct trading pair between yuan, also called RMB, and the two Gulf currencies effective from September 26.
Sami Mahfouz, head of Standard Chartered Bank's Financial Markets UAE, said, the bank has a broad network and historical presence in the Middle East and offer one-stop products and solutions covering cash, trade, foreign exchange and commodities.
"China is the UAE's second-largest trade partner, and Saudi Arabia's largest trade partner. Direct transactions for RMB against dirham and riyal will benefit the formation of direct exchange rates between the RMB and these two currencies, the reduction of exchange transaction costs, the promotion of bilateral trade and investment between China and these two countries, as well as driving the internationalisation of the RMB. We are greatly honoured to be one of the first direct market-makers, and also pleased to see that the RMB is playing an increasingly important role in trading, investment and financing in the Middle East," said Mahfouz.
On Tuesday, HSBC said it had received regulatory approval to be one of the first market makers for direct onshore trading of yuan and the two Gulf currencies in China's interbank foreign exchange market.
"Direct trading of these two currency pairs will further facilitate trade and investment flows between China and the Middle East, a region key to China's ambition of revitalizing the old Silk Road through its Belt and Road initiative," said Ryan Song, Executive Vice President and Head of Global Markets for China at HSBC.
"Use of the RMB has been rising across the Middle East region over the last few years. Take the UAE for example, SWIFT data shows that its use of the RMB in 2015 accounted for 74 per cent of all payments by value with mainland China and Hong Kong, an increase of 52 per cent compared to 2014," he added.
Chinese move to allow yuan's direct trading pair with dirham was in anticipation of a remarkable surge in bilateral trade and tourism ties following a decision by the UAE to grant visa on arrival for Chinese visitors.
Currency experts said direct trading pair would help lower foreign exchange costs for trading companies in the UAE and Saudi Arabia, where currencies are pegged to the dollar. It is strategically important given the UAE's fast growing trade and economic ties with the world's second largest economy, particularly in the aftermath of the open visa policy announced for China, which is currently ranked as Dubai's largest trade partner and the UAE's second-biggest trading partner.
-issacjohn@khaleejtimes.com