Economic ties between Moscow and Beijing have been further strengthened after the Russian Central Bank announced that the yuan-ruble exchange rate would become the benchmark for other currency pairs.
The bank’s statement on Thursday came after a turbulent day that saw the Moscow Exchange (MOEX) suspend trading in dollars and euros in response to a new set of US sanctions aimed at thwarting Russia’s war effort in Ukraine.
“Over the past two years, the role of the US dollar and the euro in the Russian market has consistently declined,” the Russian central bank said, explaining when Moscow’s full-scale invasion began, business daily Vedemosti reported.
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The bank said this was due to “trade flows shifting eastwards and settlement currencies switching to rubles, yuan and other friendly currencies,” referring to countries that have not joined Western sanctions against Russia.
“The yuan/rouble exchange rate will determine the performance of other currency pairs and serve as a guide for market participants,” the central bank said. It also announced it would halt trading in the Hong Kong dollar because it is pegged to the U.S. dollar.
China has officially remained neutral in the face of President Vladimir Putin’s aggression, but its trade with Russia has grown significantly and is expected to reach a record $240 billion in 2023. Putin, meanwhile, has consistently called for a shift away from a Western-dominated global financial system.
“The yuan/rouble exchange rate will determine the trajectory of other currency pairs and serve as a benchmark for market participants,” the bank’s statement added, noting that the yuan’s trading share on the Moscow Stock Exchange rose to 54 percent last month, making it the main currency for foreign exchange trading.
According to CNN, MOEX’s dollar-to-ruble trading volume has been hovering around 1 billion rubles ($11 million) per day, while euro-to-ruble trading volume is around 300 million rubles ($3 million), far below the yuan-to-ruble volume which typically exceeds 8 billion rubles ($90 million).
Earlier, the Moscow Exchange had halted trading of dollars and euros after the US Office of Foreign Assets Control (OFAC) published details of its latest sanctions targeting Russian banks that act as intermediaries for dollar transactions on Russia’s foreign exchange market.
This means that banks, businesses and investors cannot trade either currency through a central exchange, but must instead rely on over-the-counter transactions conducted directly between two parties.
The new sanctions will take full effect on August 13, but companies and individuals can continue to buy and sell euros and dollars through lenders, while the central bank said all foreign currency deposits “remain safe.”
Newsweek The Russian Central Bank has been contacted for further comment.
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Newsweek is committed to challenging conventional wisdom, seeking common ground and finding connections.
