China and Japan to Abandon U.S. Dollar in Bi-Polar Trade Reported December 27, 2011

China, Japan to trade in own currencies
Published: Dec. 27, 2011
BEIJING, Dec. 27 (UPI) — China and Japan, the world’s second- and third- largest economies, plan to trade in their own currencies instead of U.S. dollars, officials said.

The announcement came during the two-day China visit of Japanese Prime Minister Yoshihiko Noda, The New York Times reported.

Japan also would seek to acquire yuan-denominated Chinese bonds, which the Times said would allow it to add yuan reserves to its foreign-exchange holdings.

China currently is the world’s largest creditor to the United States with most of its foreign exchange reserves of $3.2 trillion held in U.S. dollars. Japan has the world’s second-largest reserves with $1.3 trillion.

The Times said the currency deal would help the two to move away from using the U.S. dollar, even as China seeks to make its yuan more widely used.

The U.S. dollar currently is the world’s reserve currency. The Chinese yuan is not yet fully convertible.

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