Opposition to the dominance of the dollar irritates the U.S.

Japanese Prime Minister Yoshihiko Noda met with his Chinese counterpart Wen Jiabao late last year to agree to expand direct transactions between the Japanese yen and the Chinese yuan.

The international financial world is dominated by the US dollar. In order to exchange yen for yuan, yen must be exchanged into US dollars and the dollar converted into yuan.
However, Noda and Wen Jiabao agreed to directly exchange Japanese and Chinese currencies without the involvement of the U.S. dollar. In simple words, Japan and China agreed to eliminate the dollar's influence on economic relations.
The agreement allows Japanese companies to build factories in China using yuan. It also allows the Bank of Japan to issue yuan-denominated bonds as part of international cooperation. The two countries have also agreed to buy government bonds from each other.
China is known to have a negative attitude towards the dominance of the dollar in the world. China has made similar agreements with Pakistan, Uzbekistan, South Korea and many other countries. Nevertheless, the yen has a much greater influence on the international financial world than the currencies of these countries, and the Japanese currency ranks fourth in terms of foreign exchange reserves. Thus, the latest agreement between Japan and China undoubtedly represents an important step forward in Beijing's strategy to drive a wedge in the dollar's dominance in international financial markets.
To be continued...

 

Based on foreign press for ForTrader.org