Economic ties between Moscow and Beijing have become even closer after the Central Bank of Russia announced that the yuan-ruble exchange rate will be a benchmark for other currency pairs.
The bank’s decision on Thursday followed a turbulent day in which the Moscow Stock Exchange (MOEX) suspended transactions in dollars and euros following a new circular of sanctions imposed by the United States aimed at thwarting Russia’s war effort in Ukraine.
Referring to the start of Moscow’s full-scale invasion, the central bank said: “Over the past two years, the role of the U. S. dollar and the euro in the Russian market has been declining,” the economic newspaper Vedemosti reported.
The bank explained that this is due to “a reorientation of industrial flows to the East and the replacement of settlement currencies with rubles, yuan and other currencies of friendly countries,” referring to countries that have not joined Western sanctions against Russia.
“The yuan/ruble exchange rate will follow the trajectory of other currency pairs and become a benchmark for market participants,” he said. The central bank also announced the suspension of trading with the Hong Kong dollar due to its peg to the dollar.
Officially independent in the face of Vladimir Putin’s invasion, China has particularly improved its relationship with Russia, reaching a record $240 billion in 2023, while Putin has touted a move away from the Western-dominated global monetary system.
“The yuan/ruble exchange rate will determine the trajectory of other currency pairs and become a benchmark for market participants,” the bank added, noting last month that the yuan’s trading percentage on the Moscow Stock Exchange was 54 percent, making it the main currency for trading.
The volume of transactions in dollars and rubles in MOEX is around one billion rubles ($11 million) per day, while transactions in euros and rubles are around three hundred million rubles ($3 million), much less than the daily volumes in yuan and rubles. exceeding 8 billion rubles ($90 million), CNN reported.
Earlier, the Moscow Stock Exchange suspended trading in dollars and euros after the U. S. Office of Foreign Assets Control (OFAC) published the main points of its new sanctions circular, adding that it targets Russian banks that act as intermediaries in the exchange of dollars in the Russian foreign exchange market. .
This means that banks, businesses, and investors cannot trade any currency through a central exchange and will instead have to rely on over-the-counter transactions conducted directly between two parties.
The new sanctions will take effect on Aug. 13, but businesses and Americans will continue to buy and sell euros and dollars through lenders. Separately, the central bank said that all foreign currency deposits “will remain safe. “
Newsweek has reached out to Russia’s central bank for comment.
Brendan Cole is a senior reporter for Newsweek in London, UK. It focuses on Russia and Ukraine, specifically on the war unleashed through Moscow. It also covers other areas of geopolitics, adding China.
Brendan joined Newsweek in 2018 from the International Business Times and, in addition to English, is studying Russian and French.
You can contact Brendan by emailing b. cole@newsweek. com or following him on his X @brendanmarkcole account.
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