The initiative will lower foreign exchange transaction costs and encourage greater use of the two currencies in cross-border trade and investments, the Monetary Authority of Singapore said.
The spot, forward and swap trading between RMB and SGD has been launched in the interbank foreign exchange market. Any institution with an interbank RMB/FX market membership can participate in the direct trading between RMB and SGD.
The China Foreign Exchange Trade System is responsible for the operation and technological support for direct trading between RMB and Singapore dollar on the inter-bank market.
It will announce the central parity rate every working day, with the spot trading range to be set at 3% above or below that rate.
The Singapore dollar will be directly traded on the China Foreign Exchange Trade system. It joins other currencies such as the US dollar, the euro, British sterling, Japanese yen, the Australian dollar, New Zealand dollar, Malaysian ringgit and Russian rouble.
Other measures
Singapore and China also agreed to strengthen cooperation in the areas of capital markets and insurance.
The MAS said it would study along with the China Securities Regulatory Commission measures to enhance collaboration between the derivatives markets of Singapore and China.
“Financial cooperation has become a pillar for Sino-Singapore bilateral relations. As China proceeds with its structural transformation and financial reform, financial cooperation between the two countries will grow in importance and mutual benefit,” said Jacqueline Loh, deputy managing director at MAS.
The MAS also proposed to allow China-incorporated financial institutions to issue RMB-denominated debt instruments in Singapore directly.
This will help to diversify long-term funding for Chinese financial institutions by allowing them to tap into the international institutional investor base in Singapore.
