Australia has signed a A$30 billion currency exchange deal with the world's second largest economy, China, to foster bilateral trade and investment, in what could also be seen as a confirming testament to the yuan's increasing buying power and global market reach.

The deal, signed on Thursday, will be carried out for an initial three-year period, subject to possible extension but with the consent of both countries' central banks, China state-run Xinhua News reported, quoting a statement released by the People's Bank of China, China's central bank.

The swap deal, which corresponds to 200-billion-yuan in China's currency, will promote trade and investment flows and help trade settlement in the yuan, the Reserve Bank of Australia said in a statement.

For the past four years, China had actually been pushing to conduct business with its trade partners by using its own currency as an alternative global reserve currency to the US dollar. It has in fact successfully entered bilateral swap agreements with about 20 economies, including Hong Kong and Japan. Suffice to say, these trading swap agreements supported the yuan, and effectively pushed its rise against the US dollar.

Of those 20 bilateral swap agreements, the one with Australia, however, is China's largest so far, The Financial Times reported.

"It's quite significant. They haven't had agreements with such advanced economies. This will gain momentum," economist Shen Jianguang based in Hong Kong told The Financial Times.

This pledge of confidence by Australia into the Chinese currency gives the latter a much needed boost to Beijing's objective of not only internationalizing its currency but having it received, accepted and respected by the much developed economies.

"It's a big step forward in formalizing the internationalization of the renminbi," Andrew Skinner, head of global trade and receivables finance at HSBC Australia, said. "It will help a lot of people get more comfortable using the currency knowing that these sorts of arrangements are in place."

HSBC earlier had said it expects the yuan to become one of the top three global currencies by 2015.

China is Australia's biggest trading partner for its iron, coal and gas exports.