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China’s RMB Yuan Replacing US Dollar on Russia’s Forex Market

Trading of Chinese RMB Yuan on Russia’s foreign exchange market hit an all-time high in March, the Bank of Russia (CBR) reported in its financial risk review on Monday (April 8).

Russia’s shift away from major Western currencies started with the US and EU sanctions imposed on the country over the Ukraine conflict. The financial restrictions made cross-border trade in Euros and Dollars more difficult and their presence on the Russian domestic foreign exchange market less important. As a result, the share of China’s currency has increased, and reached 53% of the total traded last month compared to 46.6% in February, according to the CBR. The share of RMB Yuan in over-the-counter trading also posted a record high, reaching 39.6%.

Meanwhile, the share of Western currencies, including the US Dollar and Euro, dropped to 46.4% on the exchange in March from 52.8% the previous month, data showed. In the over-the-counter segment, their share also continued to decline, decreasing to 54.7% from 59.8% in February.

Russian financial Analysts say the changes in the RMB Yuan and US Dollar trading volumes reflect Russia’s shift away from transacting in the currencies of so-called ‘unfriendly’ countries against the backdrop of international sanctions.

The restrictions include the blacklisting of a number of Russian banks and their removal from the SWIFT interbank messaging system, as well as bans on transactions with Russian financial entities and the freezing of foreign exchange reserves.

Meanwhile, Russia continues to establish the conditions for settlements in various national currencies, according to CBR Governor Elvira Nabiullina. Over the past year, the volume of settlements in currencies other than the US Dollar and Euro has surged from 39% to 67%, according to her. Other currencies being used include UAE Dirhams, Indian Rupees, and Kazakh Tenge, amongst others. That spread will likely continue, especially as the BRICS are working on creating a basket of currencies.

Russia’s Finance Minister Anton Siluanov, has repeatedly said that Moscow no longer trusts the US Dollar, calling it “a completely unreliable instrument.”

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