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China's currency, the yuan begins trading in the U.S.

Paula Duffy's picture

Bank of China Ltd. has let down a large barrier to trading in its currency, the yuan.

The government controlled Bank of China has three branches in the United States, two in New York and one in Los Angeles. Interested corporations or individuals must open a yuan account at one of them to begin trading.

The move by China indicates a willingness to loosen the tight controls on the country's currency, according to the Wall Street Journal. The ultimate aim say analysts, is for the yuan to play an expanded role in global financial markets.

The yuan, also known as the reminbi, began trading outside the confines of mainland China only this past July, in Hong Kong. Since that time, the market for the currency has exploded. Despite that, the Journal points out that yuan trading is infinitesimal when compared to the daily trading in the dollar, yen and euro.

At the same time as it is taking small steps in the U.S., China has issued stricter regulations on Hong Kong banks who would like to trade on the yuan in foreign exchange markets. Financial market managers understand that the Chinese are skittish about speculation in its currency which could prove disruptive to the country's economic growth.

Exchange rates are on the top of the list of items to be discussed next week when China's President Hu Jintao visits Washington, D.C.

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