THE Bank of Taiwan launched an exchange service between the yuan and the New Taiwan dollar in Shanghai yesterday, becoming the first bank from the island to provide the service over the counter on China's mainland.

Its Shanghai branch is the clearing bank for the New Taiwan dollar on the mainland. An initial batch of NT$25 million (US$836,904) of bank notes was shipped to the branch on February 6. The business started yesterday.

The mainland and Taiwan signed a pact last August to establish a cross-Strait currency clearing mechanism after the island's biggest bank opened its first branch in Shanghai a month earlier.

Analysts said the clearing mechanism will raise the efficiency and lower the cost of the exchange between the two currencies.

Fang Xinghai, director of the Shanghai Financial Services Office, said the move will also boost the yuan's use globally.