(Yicai Global) April 3 -- When China and Brazil recently reached an agreement to add a local currency settlement channel, they did not discard the US dollar as an intermediate currency, a banking industry insider said.

The deal between the two countries’ central banks does not aim to exclude use of the dollar but to open a new local currency settlement channel, thereby diversifying the currencies used in cross-border transactions, according to the source at a Chinese state-owned bank.

The People’s Bank of China and Banco Central do Brasil reached a deal to conduct bilateral trade and financial transactions using their own currencies, the Chinese yuan and the Brazilian real, AFP reported on March 29, citing the Brazilian government.

Besides Brazil, Saudi Arabia and Russia also use the yuan more in trade settlement, indicating the strong momentum of yuan internationalization and the optimism of other countries to use other currencies in trade settlement to prevent risks from factors including geopolitics, Zhu Jun, chairman of the Silk Road Fund and former head of the PBOC’s international department, said during the Boao Forum for Asia.

The PBOC said on Feb. 9 that it had penned a memorandum of understanding to set up yuan clearing arrangements with Brazil’s central bank. It also inked a similar agreement with Deutsche Bundesbank, Germany’s central bank, on March 28, 2014.

The PBOC has authorized 31 designated Chinese yuan clearing banks in 29 countries or regions.

Editor: Futura Costaglione