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(snip)Canada settles first trade deal in yuan
HSBC Bank Canada said Wednesday it has completed the first Canadian trade using the yuan exclusively, as the Chinese currency continues to gain traction as an international reserve alongside the U.S. dollar. The deal was conducted for B.C.-based industrial auctioneer Maynards Industries.
Fabrice de Dongo, a spokesman for HSBC Canada, said HSBC made a direct payment in the yuan currency on behalf of Maynards to a company in China. Previously, the payment would have had to be converted into U.S. dollars first.
The ability of Canadian businesses to now conduct trade using the yuan will open up many opportunities in China, said Mark Watkinson, an executive vice-president with HSBC Canada, said.
"China is one of the fastest growing economies in the world, and provides enormous business opportunities for Canadian companies doing business internationally," he said in a release. "The ability to conduct trade in [the yuan] may assist [businesses] in taking advantage."
The vast majority of global trade is conducted using the U.S. dollar. But with the greenback taking a hit during the past year along with the rise of the Chinese economy, there has been discussion in recent months of adding the yuan as another reserve currency. Some, including Robert Zoellick, World Bank president, have even suggested a return to a modified gold standard.
Letting Canadian businesses trade with Chinese companies in the native currency, bypassing the U.S. dollar, eliminates some exchange risk.(snip)
'et tu, Brute ?'
Canada has now joined the ranks of Russia, Venezuela etc. in bypassing the big New York banks as well as the US dollar re foreign trade settlements with China.
The results of this change fall into two major areas. First, by eliminating Canada's need to purchase US Dollars on the world market as an intermediary step in foreign trade settlements with China, overall 'external' demand for US Dollars is reduced. This in turn will eventually result in a lowering of the US dollar's exchange rate = purchasing power ( with associated US dollar denominated prices for food, energy and anything else that involves world market commodity pricing rising as a result ). Second, by cutting out the 'middle man', far less money will be earned by the big New York banks as a result of CDN$ to US$ then US$ to Chinese Yuan currency exchange fees. Instead, China's HSBC bank will be earning those fees.
An unavoidable side effect of this change will be a lowering of the US dollar's exchange rate versus the CDN$. This in turn will prompt more Canadians to cross into the USA for shopping trips, and will also prompt US companies and individuals to spend less money on Canadian products and services.



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