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Yuan Overtakes Dollar as Top Traded Currency in Russia

Amid Western sanctions and a shift in foreign-trade transactions, China's yuan has dethroned the U.S. dollar as the most traded currency in Russia.

Dollar and Yuan
Dollar and Yuan

Yuan's Rise in Russian Trading Volumes

China's Yuan has taken over the U.S. Dollar as the most traded currency in Russia, a year after the invasion of Ukraine and the subsequent Western sanctions against Moscow. The Yuan surpassed the Dollar in monthly trading volume for the first time in February, with the difference becoming more significant in March, as shown by data compiled by Bloomberg from the Moscow Exchange.

Sanctions Push Russian Banks Towards Yuan

After additional sanctions this year, the shift to the Yuan affected a few Russian banks that could still make cross-border transfers in Dollars and other currencies deemed "unfriendly" by the Kremlin. Raiffeisen Bank International AG, a primary conduit for international payments in Russia, faced heightened pressure from European and U.S. authorities.


Russia Strengthens Ties with China

Since the February 2022 invasion, Russia has fostered closer ties with China, leading to a break in relations with the West. Chinese President Xi Jinping visited Moscow in March, promising expanded cooperation in trade, investment, supply chains, mega projects, energy, and hi-tech sectors.

Sanctions Drive Currency Changes in Foreign Trade

Sweeping sanctions targeting Russia's financial system have forced the Kremlin and Russian companies to shift their foreign-trade transactions from the Dollar and euro to currencies of countries not participating in the restrictions.

Finance Ministry's Move to Yuan and National Wealth Fund

Russia's Finance Ministry converted its market operations to the Yuan earlier this year and restructured the national wealth fund to hold 60% of its assets in Yuan. The Bank of Russia consistently urges companies and citizens to move their assets into ruble or "friendly" currencies to mitigate the risk of asset freezing or blocking.

Dollar's Previous Dominance in the Russian Market

Before the recent change, the Dollar was the most popular currency in the Russian market, with the Yuan occasionally surpassing it in trading volume. "Now there are fewer Dollars on the market as Russia's revenues decreased due to the oil-price drop and a decrease in exports," said Iskander Lutsko, a strategist at ITI London. Meanwhile, "commodity imports from Russia to China are up by 29%, although exports from China are stagnating."