After the announcement of sanctions against the Moscow Exchange and its subsidiaries by the United States last week, the Chinese yuan has been weakening against the Russian ruble for the fifth consecutive day.
On Wednesday, June 19th, the exchange rate of the Chinese yuan against the ruble fell below the 11-ruble mark for the first time since May 2023, dropping by over 5% in Moscow trading before partially recovering. On Tuesday, the yuan had dropped by more than 4% against the ruble, marking a new low for the yuan-ruble exchange rate in over a year.
Due to the impact of the newly implemented US sanctions, the Moscow Exchange announced on June 13th that it would temporarily suspend trading in US dollars, euros, and Hong Kong dollars.
According to a report by Bloomberg on June 19th, Evgeny Kogan, a professor at the Moscow Higher School of Economics, expressed concerns that market participants fear the yuan could face a similar fate and are therefore moving away from the Chinese currency.
Evgeny Loktyukhov, an analyst at the Russian Industrial Bank, mentioned various reasons for the weak demand for the yuan, including issues with importers making payments in yuan, foreign companies being unwilling to switch to yuan payments, and difficulties in conducting large currency exchange transactions through forex trading.
Some banks in the United Arab Emirates, China, and Turkey have intensified restrictions on payments to their Russian counterparts, complicating trade between the two parties. Data from the Russian Central Bank shows that Russia’s imports decreased by $13 billion in the first five months of this year compared to the same period last year.
Since the US escalated sanctions last week, individuals and companies newly sanctioned span across Russia, Belarus, the British Virgin Islands, Bulgaria, Kazakhstan, Kyrgyzstan, China (including Hong Kong), Serbia, South Africa, Turkey, and the United Arab Emirates. The US Treasury Department stated that to strengthen the effectiveness of sanctions, branches of sanctioned banks in other countries or regions may face secondary sanctions.
The latest round of sanctions also targeted dozens of Chinese companies, potentially impacting Russia’s imports from China.
“The depth and duration of the ruble’s strength against the yuan will depend on officials’ actions.” Economist Ilya Fedorov from BCS stated, “The Russian Central Bank may stop intervening until the situation stabilizes, or the government may reduce the mandatory selling of foreign currency for exporters.”
On Wednesday, the onshore yuan against the US dollar officially closed at 7.2570 at 16:30 Beijing time, down 8 points from the previous trading day’s official closing price and 32 points lower than the previous night’s close.