China and Japan Agree to New [Dollarless] Currency Dealings

China and Japan have agreed to start direct trading of their currencies, officials announced during a visit here by Japan’s prime minister, Yoshihiko Noda.

The move was among several that emerged from Mr. Noda’s meetings with President Hu Jintao.

Japan will also apply to buy Chinese bonds next year, allowing it to accumulate more renminbi in its foreign-exchange reserves.

China is the world’s second-largest economy while Japan is the third largest, and the currency agreement is part of a move away from using dollars.

Chinese officials have said recently they would like to broaden the global use of the renminbi, also known as the yuan, and want to see more countries move away from relying on dollars as the worldwide currency.

Mr. Noda had originally scheduled the two-day trip to Beijing to talk about strengthening bilateral ties between China and Japan, an agenda the countries did not abandon despite the focus on Mr. Kim’s death. State news broadcasts in North Korea have been proclaiming Mr. Kim’s youngest son, Kim Jong-un, the “Great Successor.” Mr. Kim is in his late 20s, and he is in transition to becoming the youngest leader of a nation with a nuclear arms program. His uncle, Jang Song-taek, also appears to be playing a prominent role in the shaping of the new leadership.

The Yonhap news agency, based in South Korea, reported Thursday that Kim Jong-nam, the estranged eldest son of Kim Jong-il, had traveled in recent days to Beijing from his home in Macau and was now staying in the Chinese capital under the “protection” of senior officials.

The Xinhua report on Mr. Noda’s visit indicates that stability, both inside North Korea and on the divided Korean Peninsula, is also the top priority for China, which is North Korea’s greatest ally and biggest trade partner.

Yuan hits record vs dollar, on track for over-4-percent gain

By Lu Jianxin and Kazunori Takada

December 25, 2011 11:28 PM EST

The yuan hit an all-time trading high against the dollar on Monday, guided by a stronger mid-point by the People's Bank of China, and looks set for an over-4-percent appreciation for 2011, traders said.

The yuan is expected to remain stable or rise slightly in the last week of the year to close 2011 near 6.30 versus the dollar, in line with market expectations.

The currency is likely to continue to appreciate next year as China continues to post big trade surpluses despite a slowdown in exports and amid pressure from the United States to let the yuan rise to balance bilateral trade, traders said.

But the yuan's appreciation is likely to slow to around 3 percent in 2012, with much of the rise seen in the second half of next year as China may keep the yuan relatively stable in the first half to assess the impact of the euro zone crisis, they said.

"The PBOC has recently set a slew of strong mid-points and pumped dollars into the market via state banks, giving the market a clear signal that the government won't let the yuan depreciate," said a trader at a major Chinese bank in Shanghai.

"But the central bank appears not in a hurry to let the yuan appreciate amid global economic uncertainties resulting from the euro zone debt crisis. So the yuan is likely to move largely sideways in coming months."

Spot yuan was trading around 6.33 against the dollar on Monday morning, up from Friday's close of 6.3364, after hitting an all-time high of 6.3287. Its previous peak was 6.3294 hit on December 16.

The PBOC set the dollar/yuan mid-point at 6.3167 on Monday, stronger than Friday's 6.3209 and near the record-high fixing of 6.3165.

FIGHT SPECULATORS

The yuan has appreciated 4.1 percent so far this year, with most of the gain being recorded in the first 10 months of the year as China tries to rebalance trade and use the currency to help fight high inflation.

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