China’s Yuan Replaces USD as Most Traded Currency in Russia

  • China’s CNY has replaced the USD as the most traded currency in Russia, a year after the invasion of Ukraine led to a slew of Western sanctions against Moscow.
  • The yuan surpassed the dollar in monthly trading volume in Feb 23 for the first time, and the difference became more pronounced in Mar 23. Before the invasion, the CNY’s trading volume on the Russian market was negligible.
  • The switch comes after additional sanctions in 2023 affected the few banks in Russia that retained the ability to make cross-border transfers in USD and other currencies of countries branded “unfriendly” by the Kremlin.
  • Sweeping sanctions targeting Russia’s financial system have forced the Kremlin and Russian companies to switch their foreign-trade transactions from the USD and EUR to currencies of countries that have declined to join any restrictions.
  • The Finance Ministry converted its market operations to the CNY instead of the USD earlier in 2023 and developed a new structure for the national wealth fund to hold 60% of its assets in CNY.
  • The Bank of Russia regularly calls on companies and citizens to move their assets into the RUB or “friendly” currencies to avoid the risk of having them blocked or frozen.
  • Although the CNY has been more popular in Russia, China’s capital account controls as well as geopolitical concerns among global investors remain a barrier as Beijing seeks to promote the currency’s usage overseas.

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