Central Bank of Russia says yuan liquidity normalized at end of Sept

MOSCOW. Oct 8 (Interfax) - Demand for funding in yuan remained high in September, and the situation normalized by the end of the month amid falling demand and a rising supply of yuan on the part of individual players, a review of financial market risks published by the Russian Central Bank said.

Due to rising demand for yuan and a simultaneous fall in supply, swap market rates exceeded 100% per annum on certain days in September. At the end of the month, average daily imputed rates were 50%, compared to 10.7% in August.

On September 16, 2024, the Central Bank significantly increased interest rates on currency swap operations when selling yuan for rubles and their subsequent purchase. From this date, rates for yuan are set at the O/N SHIBOR rate (Overnight Shanghai Interbank Offered Rate), plus 12 percentage points (previously +5.5 pp). For rubles, to calculate the swap difference the rate is still calculated as the Central Bank's key rate, reduced by 1 pp.

The bank made the decision while taking into account the price tendencies for currency swap operations and in order to minimize the impact of these operations on market pricing, the review said.

"To stabilize the situation on the currency market amid the current restrictions, the banking sector is advised to reduce the forexation of assets, including limiting the growth of foreign currency lending. The Central Bank's currency swap operations cannot be an instrument for funding foreign currency assets, but serve as a stabilization mechanism in the context of short-term surges on the domestic currency market," the bank said.