BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group (NYSE:BMO)(TSX:BMO), has received regulatory approval from China’s central bank to be the first and sole market maker for direct onshore trading of the Chinese yuan (CNY) and the Canadian dollar (CAD).

The move will facilitate trade and cross-border investment between China and Canada and increase the presence of the RMB in the North American market. In addition, it would make exchange rate transactions for businesses and investors from both countries easier and mitigate foreign exchange risk.

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While the number of Canadian businesses using the RMB has increased in the last year, they are still well below the global average. Globally, businesses are finding the RMB much easier to use since they have become more accustomed to using China’s currency than they did in the past.

In addition to the latest appointment, BMO has been known as a long-standing advocate of the internationalisation of the Chinese currency, as well as one of the most active participants in China’s interbank FX market. It was also the only Canadian bank to be appointed as the official USD/CNY FX spot, forward and swap market maker in CFETS since 2006.

Canada to use more RMB payments

In 2015 the bank was among the contributors in the establishment of a renminbi hub in Canada in 2015, allowing North and South American firms to purchase the currency on the open market through the hub based in Toronto.

BMO’s China Capital Markets team will leverage its extensive experience in foreign currency derivatives products innovation to help clients and other financial institutions effectively manage their USD/CNY currency risks and reduce currency hedging cost.

Global head of the division at BMO Capital Markets, C.J. Gavsie, commented: “We are proud to have been accorded this privilege, which attests to BMO’s expertise and strong ties to China. The launch of direct trading between CAD and CNY promotes the use of Chinese and Canadian currencies in cross border trade and investment settlement.”

“That CAD/CNY is directly quoted in China’s interbank market signifies Canada’s importance in China’s international trade and investment,” added Mr. Gavsie.