Australian Prime Minister Julia Gillard. Source: www.guardian.co.uk

(Xinhua) - Australia and China have reached a new agreement to allow the Australian and Chinese currencies to trade directly. This is a step toward of greater internationalization of the Chinese currency and strengthening bilateral trade relations between the two countries. Australian Prime Minister Julia Gillard said at Shanghai’s China Executive Leadership Academy Pudong (CELAP) that the Australian and Chinese currencies will be directly traded on the Chinese mainland for the first time. This deal will allow the Australian dollar (AUD) and the Chinese yuan to exchange directly without the dollar as the middle currency, facilitating two-way investment activities and reducing the cost of exchange. This agreement makes the Australian dollar the third major currency to directly trade in China's mainland foreign exchange market, after the U.S. dollar and the Japanese yen.