New Zealand and China will begin direct trading of currencies following an agreement reached by the Prime Minister and China's premier on Tuesday.
John Key finalised the negotiations with Li Keqiang in Beijing on Tuesday night during Mr Key's official visit there.
John Key and Chinese Premier Li Keqiang exchange Chinese Yuan and New Zealand Dollar banknotes. Photo: AFP
Under the agreement, the New Zealand dollar and the Chinese renminbi or yuan will be able to be directly traded on the China Foreign Exchange, rather than going through two trades against a third currency - usually the US dollar.
Mr Key says it is an important step in doing business with New Zealand's largest export market and will reduce the costs of converting between the two currencies. He says it will stimulate trade and investment.
The New Zealand dollar is the sixth currency to be directly traded with the renminbi, after negotiations began in April last year.
However, foreign exchange adviser Derek Rankin told Radio New Zealand's Morning Report programme on Wednesday the move is arguably more political than financial because companies have been able to convert yuan into New Zealand dollars for some time.
He says the Chinese are keen to cut out the pre-eminence of the US dollar in world currency and commodity trading.
