Bank of Brazil carries out first Forward Exchange Contract operation in Chinese currency

26 August 2011

Brasilia, Brazil, 26 Aug – The Bank of Brazil has carried out its first Forward Exchange Contract operation in the Chinese currency, the yuan, according to a report in Brazilian newspaper Jornal Econômico.

The loan was provided to company Companhia Brasileira de Metalurgia e Mineração (CBMM), a specialist in niobium-based products that is amongst the biggest exporters to China.

According to Allan Toledo, vice president of the bank, this is the first experience, but there will likely be growth in these types of transaction, given the flow of trade to China, with over 2,000 exporting companies.

“Demand is very high and the Forward Exchange Contract in Chinese currency eliminates the need to hedge both for the exporter and the importer, which reduces the end cost,” said Toledo.

In general, Forward Exchange Contracts are signed in dollars, as liquidity is greater and the US currency is the benchmark for foreign trade. There are also options for resources in euros and in yen, but nowadays over 80 percent are signed in dollars, said the Bank of Brazil executive.

The credit lines in yuan are offered to the Bank of Brazil in partnership with over 10 local banks, such as the Industrial and Commercial Bank of China (ICBC) and the Bank of china (BOC), two of the biggest banks in the world. (macauhub)