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China’s Yuan is Now the Most Traded Currency in Russia

Russia’s central bank has been calling for companies and citizens to move assets into rouble or ‘friendly’ currencies to avoid the risk of them being blocked or frozen amid sanctions over war in Ukraine

Chinese officials are said to have privately taken credit for getting Putin to back down from his nuclear blackmail after multiple veiled and open threats to use such weapons in Ukraine.
Putin and Xi will take part in a gala evening celebrating 75 years since the Soviet Union recognised the People's Republic of China. This image shows them at a reception at the Kremlin in March 2023 (Sputnik via Reuters).


The Chinese yuan has surpassed the US dollar as the most traded currency in Russia, largely because of sanctions imposed on Moscow after it invaded Ukraine 14 months ago.

That development occurred initially in February, but the change “widened further in March”, according to a report by InvestorsKing, a financial news-site that cited data from the Moscow Exchange.

Russian companies and the government have been forced to undertake foreign trade transactions in currencies of allies such as China and India, which have declined to support sanctions imposed by Washington, the European Union and other nations because of the strong reaction to the first conflict in Europe since World War II.

Russia’s Finance Ministry converted its market operations to the yuan instead of the dollar earlier this year and developed a new structure for the national wealth fund to hold 60% of its assets in yuan, the report said, as “additional sanctions imposed this year that have affected the few banks in Russia that can make cross-border transfers in dollars and other currencies of countries considered ‘unfriendly’ by the Kremlin”.

The Bank of Russia, the country’s central bank, has been advising companies and citizens to move their assets into the rouble or ‘friendly’ currencies to avoid the risk of having them blocked or frozen.


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Sanctions over the war in Ukraine appear to be a key factor in eroding US dollar dominance, given that countries in various regions such as Southeast Asia and the Middle East have preferred to keep their heads down and not pick sides amid heightened geopolitical tensions.

China’s long-term plan to reduce the power and reach of US dollar hegemony took two steps forward last week. And more such moves appear to be looming.

The Brazilian government announced on March 29 that it had agreed with Beijing that all bilateral trade will now be settled in their local currencies, rather than the dollar. That deal was spurred partly by the fact China is Brazil’s biggest trading partner.

The second step was news that China’s national oil company CNOOC and France’s TotalEnergies had completed China’s first LNG trade settled in yuan.

Economic analysts have noted that China, Russia and the Shanghai Cooperation Organization (a China-led group of developing nations) are starting to build alternative economic blocks separate from the dollar, which has been the dominant global currency for decades.

Interest in greater use of local currencies is also growing in Southeast Asia, particularly for trade within the region.

Talks about reducing dependence on the US dollar, plus the euro, yen and British pound and moving settlements to local currencies was a key topic at a meeting of ASEAN finance ministers and central bank governors that began in Indonesia on March 28, according to a report by ASEAN Briefing.

Indonesian President Joko Widodo was quoted as saying that moving away from Western payment systems was necessary to protect transactions from “possible geopolitical repercussions”.


Rouble plunges, oil rises

Meanwhile, the Russian rouble tumbled to its weakest against the dollar in almost a year on Tuesday, edging closer to the 80 mark, hampered by a seasonal drop in foreign currency supply from exporters, in spite of this week’s jump in oil prices.

By 0745 GMT, the rouble was 0.9% weaker against the dollar at 79.49, its weakest since April 19, 2022.

Against the euro, it was down 1.1% at 86.85, its weakest since April 15, 2022, and it was 1% weaker against the yuan at 11.55, an April 25, 2022, low.

Oil prices jumped over 6% on Monday after the Organization of the Petroleum Exporting Countries and their allies including Russia announced surprise production target cuts on Sunday, raising fears of tightening supplies.

On Tuesday, Brent crude oil, a global benchmark for Russia’s main export, was up 0.9% at $85.7 a barrel.

Although higher oil prices usually boost the rouble, reduced FX supply is hurting the Russian currency. Month-end tax payments that usually see exporters convert foreign exchange revenues into roubles were due last week.

The rouble has been on a steadily weakening trend all year, under external pressure since a Western price cap on Russia’s oil sales came into force in early December alongside a European Union embargo on buying sea-borne Russian oil.

The risk of lower export earnings as a result and the cost of reorienting raw material supplies east have impacted the rouble rate.

The rouble has lost 12% against the dollar year-to-date and almost 22% since the Dec. 5 price cap came into force.

“Since mid-January, the dollar/rouble pair has been trading in an upward trend and all attempts to break that have so far ended in failure,” said Alexei Antonov of Alor Broker.

The rouble’s fall could accelerate sharply, if the 80 resistance mark is broken, Antonov said.

Russian stock indexes were mixed. The dollar-denominated RTS index was steady at 988.8 points. The rouble-based MOEX Russian index was 0.9% higher at 2,496.2 points, a near one-year high.


  • Jim Pollard with Reuters


NOTE: This report was expanded and updated with further details and the headline changed on April 4, 2023.





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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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