Brazil and China have reportedly struck a deal to ditch the U.S. dollar in favor of their own currencies in trade transactions. 

The deal, announced Wednesday, will enable China and Brazil to carry out trade and financial transactions directly, exchanging yuan for reais – or vice versa – rather than first converting their currencies to the U.S. dollar.

The Brazilian Trade and Investment Promotion Agency (ApexBrasil) said the new arrangement is expected to "reduce costs" and "promote even greater bilateral trade and facilitate investment." 

China is Brazil’s largest trading partner, accounting for more than a fifth of all imports, followed by the United States, according to the latest figures. China is also Brazil’s largest export market, accounting for more than a third of all exports. 

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China overtook the United States as Brazil’s top trading partner in 2009. Today, Brazil is the largest recipient of Chinese investment in Latin America, driven by spending on high-tension electricity transmission lines and oil extraction. 

Officials from both countries reached a preliminary agreement to ditch the U.S. dollar in January and the deal was announced after a high-level China-Brazil business form in Beijing. 

Brazilian President Luiz da Silva, sworn in on January, has moved to strengthen ties with Beijing after a period of rocky relations under his predecessor, Jair Bolsonaro, who used anti-China rhetoric on the campaign trail and in office. 

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Brazil’s leftist president was scheduled to visit Beijing last weekend by had to cancel his trip after contracting pneumonia. A delegation composed of ministers, senators, lawmakers, and hundreds of business people – including more than 100 from the agricultural sector – had been set to accompany Lula during his first state visit since taking office. 

The Associated Press contributed to this report.