China Launches Swap Deal with ECB

China launched a currency swap deal with the euro zone on Thursday, in the country’s latest push to transform the yuan into a major world currency.

The foreign exchange (FX) swap — an agreement to exchange one currency for another at a set rate at a certain time in the future — will have a maximum size of 350 billion yuan ($57.2 billion) and 45 billion euros ($60.9 billion) and will be valid for three years.

“From the perspective of the euro system, the swap arrangement is intended to serve as a backstop liquidity facility and to reassure euro area banks of the continuous provision of Chinese yuan,” said the European Central Bank in a news release.

Benefits of FX swap agreements include improving liquidity for currencies outside the domestic market, helping ensure the stability of financial markets. Plus, there has been a strong growth in China-European trade and investment flows, with Europe as a whole accounting for 14 percent of China trade last year.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza