South Korea and Indonesia are planning to begin trade using national currencies © Getty Images / skodonnell

The central banks of South Korea and Indonesia have signed a memorandum of understanding to promote bilateral trade in national currencies, moving away from the US dollar as an intermediary.

The step is expected to help South Korean and Indonesian corporations to lower transaction costs and exposure to exchange rate risks, the central banks of the two nations said in a joint statement.

The Bank of Indonesia and the Bank of Korea highlighted that they would continue to strengthen collaboration through information-sharing and regular discussions, as the two nations seek to boost financial ties.

The agreement was signed on the sidelines of the 26th ASEAN+3 Finance Ministers and Central Bank Governors’ Meeting that kicked off in the South Korean city of Incheon on May 2.

Key Asian bloc looking to dump dollar and euro – media Key Asian bloc looking to dump dollar and euro – media

The ASEAN+3 group consists of the ten member states of the Association of Southeast Asian Nations, which are joined by China, Japan, and South Korea.

Attempts to shift away from the greenback in international trade have been gaining momentum among major economic blocs such as ASEAN and the BRICS group, which consists of Brazil, Russia, India, China, and South Africa.

The step comes against the backdrop of sweeping sanctions introduced by Western nations against Russia, a major global energy producer and exporter.

The head of the Indonesian central bank, Perry Warjiyo, said last month that his nation was implementing a shift away from the dollar with countries such as Thailand, Malaysia, China, and Japan. In March, Brazil and China signed an agreement to trade in their own currencies, dropping the greenback as an intermediary.

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