China announced on Feb. 2 that it will allow direct trading between the Chinese yuan and the Thai baht on its interbank foreign exchange market beginning from Feb. 5.
The move aims to boost bilateral trade and investment, facilitate the use of the two currencies in trade and investment settlement, and reduce exchange costs for market players, said the China Foreign Exchange Trade System (CFETS) in a statement.
This will also bring the number of foreign currencies that are allowed direct trading with the yuan to 24. Previously, trading between the yuan and the baht was only allowed in regional interbank markets.
The central parity rate between the yuan and the baht will be decided according to the average quotation of direct trading market makers before the market opens each business day, according to CFETS.
In the spot forex market, the trading rate between the two currencies can fluctuate by up to 10 percent from the central parity rate each trading day.
To support the Belt and Road Initiative, China will also waive the transaction fee for yuan-baht direct trading till July 31, 2020, the CFETS said.
China is Thailand's largest trading partner. In the first ten months of 2017, bilateral trade volume rose 13.2 percent year-on-year to $60.68 billion.