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CHINA’S yuan will start direct trading with the New Zealand dollar from today as the two countries tighten economic links and China expands the use of its currency in international trade and investment.

The move could cut foreign exchange costs for traders in the two countries as it removes the need to use the US dollar as an intermediary for settling a transaction, the People’s Bank of China said yesterday.

“The new measure will encourage use of the yuan and the New Zealand dollar in bilateral trade and investment, and enhance financial cooperation between the two countries,” the central bank said.

The announcement was made during New Zealand Prime Minister John Key’s visit to Beijing.

“It’s great to have been in Beijing to witness the conclusion of negotiations to launch direct trading of the New Zealand and Chinese currencies, which I kicked off during talks with President Xi (Jinping) on the margins of the Bo’ao Forum in April 2013,” the New Zealand Herald quoted Key as saying.

Official data showed that two-way trade between New Zealand and China surged 29 percent to US$16 billion in the 12 months through January, and China last year became New Zealand’s largest trading partner, replacing Australia.

The NZ dollar is the sixth currency to be directly traded with the yuan after the US dollar, the Japanese yen, the Russian ruble, the Malaysian ringgit and the Australian dollar.