Russia names RMB main forex currency amid US sanctions

Russia has officially designated China’s renminbi as its main foreign currency, replacing the US dollar and the euro, following new US sanctions aimed at further isolating the country from the global financial system amid its war with Ukraine.

The Russian central bank has suspended trading in dollars and euros on the Moscow Exchange (Moex). Transactions in the two currencies will continue on the over-the-counter (OTC) market.

The yuan/rouble exchange rate will now set the trajectory for other currency pairs on the Moex, including the euro and the dollar, according to the Bank of Russia.

“The yuan/rouble exchange rate … will become a reference point for market participants. The share of the yuan in Moscow Exchange trading in May was 54%,” the central bank says. “Thus, the yuan has already become the main currency in exchange trading.” 

The United States on June 12 announced new sanctions against Russia, targeting more than 300 new entities and people accused of sustaining its “war economy”.

“Today’s actions strike at their remaining avenues for international materials and equipment, including their reliance on critical supplies from third countries,” US treasury secretary Janet Yellen says.

The share of the dollar and euro in the Russian market has been declining over the past two years as trade flows and settlement shifted to currencies of friendly countries, the Ukrainian news agency UNN reports, citing the Russian central bank.

Prior to the conflict, the share of the dollar and euro in Russia’s trade settlement was around 90%.

Meanwhile, the renminbi has continued to expand its role in the global financial system. It is now the world’s fourth most active currency, accounting for 4.69% of global payments, surpassing the Japanese yen (4.13%) but trailing behind the US dollar (47.37%), the euro (21.93%) and the pound (6.57%), according to data from the Society for Worldwide Interbank Financial Telecommunication (Swift) as of March 2024.