China started allowing the yuan to trade against the Russian rouble in the interbank market from Monday as policymakers promote the currency's use in global trade and finance.
The move will help "facilitate bilateral trade between China and Russia and help develop yuan trade settlements," according to a statement published on the website of the China Foreign Exchange Trade System (CFETS), a subsidiary of the People's Bank of China.
The central bank calculates the daily reference rate by taking an average of quotes from commercial banks designated to act as market makers, the statement said.
"The pace of internationalizing the yuan is accelerating," said Zhao Qingming, a senior analyst in Beijing at China Construction Bank Corp, the country's second-largest lender.
"The direct trading between the yuan and the rouble will help expand trade settlements in the two currencies."
China is allowing greater use of its currency for cross-border transactions to reduce reliance on the US dollar, after Premier Wen Jiabao said in March he was "worried" about holdings of assets denominated in the greenback. Purchases of US currency to contain yuan gains contributed to a $194 billion increase in the nation's foreign-exchange reserves in the third quarter, boosting the total to a record $2.65 trillion.
So a challenge to the US dollars status as the reserve currency...