India and the UAE have agreed to a currency swap that is expected to boost economic ties between the two countries, it was announced on Tuesday.

In an official statement, the Indian government explained that through the agreement, both countries can make payments in their own currency without involving a third currency, such as the dollar.

The swap is for 35 billion rupees or AED 1.8 billion ($496m).

“The bilateral currency swap agreement between India and UAE is expected to reduce the dependency on hard currencies like the US dollar,” the embassy said. ‘It is also expected to give a push for the local currencies of the two nations and it may reduce the impact of volatility in exchange rates arising from dependency on a third currency.”

The statement added that “it is also expected to reduce the transmission costs arising from exchange rate risk.”

The signing agreement between the UAE Central Bank and the Indian Reserve Bank took place during the ministerial meeting of the 12th session of the UAE-India Joint Commission Meeting, or JCM, in Abu Dhabi.

Bilateral trade between the UAE and India stood at $52 billion in 2017, of which the non-oil economy comprised $34 billion.