China and Brazil strike deal to use own currencies for trade instead of dollar

China and Brazil have reached a deal to trade in their own currencies, ditching the US dollar as an intermediary, the Brazilian government said on Wednesday, Beijing's latest salvo against the almighty greenback.

The deal will enable China, the top rival to US economic hegemony, and Brazil, the biggest economy in Latin America, to conduct their massive trade and financial transactions directly, exchanging yuan for reais and vice versa instead of going through the dollar. “The expectation is that this will reduce costs … promote even greater bilateral trade and facilitate investment,” the Brazilian Trade and Investment Promotion Agency, or ApexBrasil, said in a statement.

China is Brazil's biggest trading partner, with a record $150.5 billion in bilateral trade last year. The deal, which follows a preliminary agreement in January, was announced after a high-level China-Brazil business forum in Beijing.

Brazilian President Luiz Inacio Lula da Silva was originally scheduled to attend the forum as part of a high-profile China visit, but had to postpone his trip indefinitely on Sunday after he came down with pneumonia.

The Industrial and Commercial Bank of China and Bank of Communications BBM will execute the transactions, officials said. China has similar currency deals with Russia, Pakistan and several other countries.