NewsMoscow designates the yuan as the primary currency amid Western sanctions

Moscow designates the yuan as the primary currency amid Western sanctions

Juan gained significance in Russia.
Juan gained significance in Russia.
Images source: © Getty Images | Contributor

9:34 AM EDT, June 13, 2024

Moscow has recognized the yuan as the main currency in the Russian financial market. The Russian central bank officially announced that the yuan-to-ruble exchange rate will now set the trend for other currency pairs. As of Thursday, Russia has been nearly cut off from free trade in euros and dollars.

On Tuesday, new sanctions imposed on Russia by the West came into effect. Since Thursday, Moscow has had limited access to foreign currencies—euros and dollars. This prompted Russian authorities to make quick decisions. The Chinese yuan has become the most important settlement currency in Russia.

The Bank of Russia emphasized that the role of the US dollar and the euro in the Russian market has consistently diminished in the last two years. This is due to the redirection of trade flows to the East and the change of settlement currency to rubles, yuan, and other currencies of countries friendly to Russia. According to data, in May, the share of the yuan in turnover on the Moscow Exchange was 54%, making it the main currency in stock trading, as published on the website.

The yuan is key for the Russian economy

The regulator noted that the official ruble exchange rate would remain unified and market-driven, only changing the scope of data used for its calculation. This referred to the Bank of Russia's decision to calculate the official ruble exchange rate based on the over-the-counter market. It was emphasized that international and national currency markets in most countries are predominantly over-the-counter, and exchange trading is not necessary for currency exchangeability, free trading of foreign currency, and market-based exchange rate formation.

The central bank confirmed that dollars and euros would continue to be traded in the over-the-counter market, where their volume has long surpassed transactions on the Moscow Exchange.

Companies and individuals can continue to buy and sell US dollars and euros through Russian banks. All funds in US dollars and euros in the accounts and deposits of citizens and companies remain safe, the statement read.

The West imposes new sanctions on Russia

The Bank of Russia stated that the sanctions imposed on the Moscow Exchange only changed the structure of trading in the domestic currency market but did not affect the amount of currency inflow from exports or the demand for currencies to pay for imports. Therefore, the overall balance in the currency market remains unchanged, unlike in 2022 and 2023, when both exports and imports saw significant changes. The sanctions were imposed only by the United States but are also observed by European Union countries, which is why stock trading in euros was also suspended.

The regulator also reminded us that the ruble exchange rate against key currencies depends on the balance of supply and demand resulting from foreign trade, not the place of transaction. Recently, due to favorable conditions in energy resource prices, the sale of currencies by exporters has increased. It grew by 13% (to 15 billion dollars) in May among the 29 largest exporters.

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