The demand for the dollar is shrinking again as Australia will now convert their money directly into Yuan instead of using the dollar as an intermediary.
China and Australia will launch direct trading between the two currencies in Shanghai and Sydney within weeks to lower trade transaction costs, a foreign bank source with direct knowledge of the matter told Reuters on Wednesday.
The new currency deal will eliminate the spread between U.S. dollars and Australian dollars from the cost of converting between the yuan and the Aussie dollar.
China has launched other new currency pairs in recent years , including with the Canadian dollar, Malaysian ringgit, and Hong Kong dollar, but the exchange rates for these pairs are still calculated based on the corresponding U.S. dollar rates.
Direct trading will begin soon after the announcements and no later than the first half of this year, the foreign bank source said.
"Considering heavy flows of mining transactions between China and Australia, the launch of direct Australian dollar-yuan trading will be significant move to reduct costs of both sides of mining trade."
China is Australia’s biggest trading partner, with combined two-way trade of $120 billion.