Yuan to replace dollar as Russia’s main foreign currency – Central Bank

The renminbi accounted for a 54% share of the FX market in May, according to the regulator

The yuan/ruble exchange rate will now set the trajectory for other currency pairs on the Moscow Exchange (MOEX), including for the euro and dollar, the Bank of Russia (CBR) announced on Thursday.

The statement comes as the latest round of US sanctions prompted the MOEX on Wednesday to suspend trading in dollars and euros. The UK followed Washington’s lead on Thursday, introducing restrictions against the Russian financial system. Transactions in US dollars and euro will continue on the over-the-counter (OTC) market.

“The yuan/ruble exchange rate … will become a reference point for market participants. The share of the yuan in Moscow Exchange trading in May was 54%,” the Bank of Russia said. “Thus, the yuan has already become the main currency in exchange trading,” it added.

According to the regulator, the share of the dollar and euro in the Russian market has consistently declined over the past two years as a result of the redirection of trade flows to the East and a change in the currency of settlements to rubles, yuan and other currencies of friendly countries.

Russia has actively begun to replace the dollar and euro in foreign trade amid Western sanctions imposed over the Ukraine conflict. It has since dramatically reduced the number of bank accounts and transactions between companies and financial institutions involving Western currencies. Prior to the conflict, the share of the US dollar and euro in Russia’s settlements was around 90%.

Russian President Vladimir Putin said last week addressing a plenary session at the St Petersburg International Economic Forum that the share of payments for Russian exports in the so-called ‘toxic’ currencies of unfriendly states has decreased by half.

READ MORE: Moscow exchange suspends trading in dollars and euro

The share of the ruble in Russia’s foreign-trade operations continues to grow while payments in the currencies of ‘unfriendly’ states – those who imposed sanctions against Russia – is declining, Putin stated.

MOEX said on Thursday that the suspension of trading in dollar and euro affects foreign and precious metals trade as well as stock and money trading on Russia’s largest public trading markets. Except for dollars and euros, all other financial instruments remain operational. The derivatives market has also been unaffected by the changes, with trade going on as usual, it said.