SHANGHAI (Reuters) - China's yuan started trading against the Australian dollar and Canadian dollar in the country's onshore foreign exchange market on Monday, the latest currency pairs to be introduced as part of Beijing's efforts to promote the use of its currency.
Beijing's wants to expand the use of the yuan for trade and investment, as a way of reducing reliance on the dollar and thereby simplifying the settlement of trade in everything from energy to manufactured goods.
The yuan is not fully convertible under the capital account but China has made efforts to raise the international status of its currency over the past couple of years as it works toward its goal of making Shanghai a global financial center by 2020.
"This is part of official efforts to enrich trading products in the Chinese market," said Liu Dongliang, currency analyst at China Merchants Bank in Shenzhen.
"In addition, both Australia and Canada are China's important trade partners," he said. "In particular, because of its strong links with Australia, China's economic and market movements often have some influence on the Australia dollar."
Australia and Canada are both major producers of the commodities that have powered China's rapid economic growth.
The pricing of the yuan against the two currencies largely reflected the value of the yuan against the U.S. dollar and the dollar's value against the Australian and Canadian dollars, traders said.
It would take time for the yuan, which has been closely linked to the U.S. dollar, to trade more independently, they added.
Trading was thin on Monday morning, but market players expect it to pick up over time along with the gradual expansion of the yuan's use in global markets.
"This morning those banks trading yuan against Australian and Canadian dollars calculated on the basis of the central bank's mid-point and real time movements of the two foreign currencies against the dollar in global markets," said a trader at a European bank in Shanghai.
"The PBOC has so far still been pricing the fixing of other currencies based on the yuan's near peg versus the U.S. dollar."
The yuan opened at 6.1266 against the Canadian dollar, after the People's Bank of China (PBOC) set the yuan/Canadian dollar's mid-point at 6.1048, and was later trading around 6.1227.
It opened at 6.2769 against the Australian dollar, also slightly weaker compared with the PBOC's fixing of 6.2491, and fetched around 6.2714 later in the session.
MORE TO COME
Trading in these two new currency pairs comes after the China Foreign Exchange Trade System started yuan trading against the rouble and Malaysian ringgit in 2010.
As part of its efforts to broaden the use of its currency, the government has turned Hong Kong into a center for offshore yuan as more and more trade is conducted in the renminbi, the official name of the currency, leading to the creation of bigger and bigger yuan pools outside mainland China.
Traders and analysts said China needed to add direct yuan trading against the Aussie because of increasing deals between China and Australia, in particular, in the mining sector.
Adding the Canadian dollar was a move to acknowledge the importance of one of the Group of Seven economies as well as being part of China's efforts to gradually have trading in all major currencies versus the yuan, they said.
Traders expect the Singapore dollar and Korean won to be among the next currencies to be traded versus the yuan.
The yuan can rise or fall 3 percent versus the Aussie and Canadian dollar from the PBOC's mid-points each day, according to an exchange announcement last Thursday.
The yuan can move only 0.5 percent to the dollar in either direction from the fixing in a day.
The domestic market now trades a total of nine currencies against the yuan, including the new currency pairs.
(Editing by Alex Richardson)
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