8 Sep 2022 18:03

Yuan growing in popularity on Russian market as individuals buy CNY39 bln, banks CNY252 bln

MOSCOW. Sept 8 (Interfax) - The Chinese yuan is growing in popularity on the Russian market among individuals as well as banks.

"The yuan's foothold in the Russian foreign exchange market is strengthening, accounting for 26% and 17% of trading on and off the exchange. Demand for this currency is being seen from a wide range of participants, most notably from banks. Individuals are showing interest in the yuan in addition to professional market participants," the Central Bank said in a Financial Market Risks review.

Individuals bought CNY39 billion on the exchange in August, the most this year. They started buying yuan more actively as net sales of unfriendly currencies such as the U.S. dollar and euro for rubles began in the middle of August for the first time since April, although these were short-lived.

The bulk of the demand for yuan on the exchanges comes from banks: since the beginning of the year, they have bought the equivalent of 1 trillion rubles in yuan in net terms, with systemically important banks buying 691.3 billion rubles worth and others 375.1 billion rubles. In August, these purchases amounted to about 252 billion rubles, of which 193.1 billion rubles by systemically important and 58.8 billion rubles by other banks.

The share of currency pairs with the yuan in exchange trading volume has reached 26%, while in April it was 6%. Yuan trading increased as the share of USD/RUB trading decreased significantly, to 43% from 58% in April. The EUR/RUB share declined less significantly to 23% against 32% in April.

"Buying yuan allows professional market participants to manage their position in unfriendly currencies - primarily U.S. dollars, since there is a high correlation between CNY/RUB and USD/RUB rates. On the long-term horizon, these currency pairs are changing in the same direction, with slight differences in the movement of rates observed only for certain short-term periods. As the analyzed range expands, the correlation of the two currency pairs increases, which suggests yuan could replace U.S. dollars as a hedging asset," the Central Bank said.

There is also a tendency for significant growth in yuan trading on the OTC market, the Central Bank said.