The central banks of South Korea and the UAE have signed a currency swap deal worth up to $5.4bn in an effort to encourage bilateral trade in their currencies that bypasses the US dollar.

The deal lasts for three years with the option to be extended. It will allow businesses in either country to swap currencies directly without needing to sell one currency and buy dollars, and then exchange those dollars for the other currency.

South Korea has signed similar agreements with several other countries.

Seoul’s imports from the UAE totaled $15.1bn in 2012. Bilateral trade between the two amounted to $22bn in 2012. There are 300 South Korean companies in the UAE and 12,000 South Korean residents.