The move reflects an increasing focus within Asia on trading with fellow Asian nations rather than the debt-plagued economies of the West.
The $US15 billion ($14.7bn) India-Japan currency swap was announced this week at the tail end of a whirlwind trip by Japanese Prime Minister Yoshihiko Noda to New Delhi and Beijing.
Japan had earlier unveiled a currency exchange deal with China on the first leg of the trip and reached a similar $US70 billion accord with South Korea in October.
Details of the deals remain vague – and some pundits have questioned the extent of their effectiveness – but they appear aimed at reducing inefficiencies in trade, increasing the profile of the yuan and providing insurance against a eurozone collapse.
The most bold assessment of the China-Japan deal is that it would speed up the “inevitable” path of the yuan towards becoming one of the world’s reserve currencies.
The deal allows for the conversion of the Chinese and Japanese currencies directly without having to first convert to US dollars, which should reduce costs and complexity for the companies involved. At the moment, about 60 per cent of all Japan-China trade is settled in US dollars.
And the currency wars continue.
Douglas – Phantom Report