(MENAFN) According to the Bank of Russia's financial risk review released on Monday, the Chinese yuan's presence on Russia's foreign exchange market reached an unprecedented high in March. This milestone underscores a significant shift in Russia's currency preferences, driven largely by geopolitical dynamics and economic sanctions imposed by Western nations in response to the Ukraine conflict.
The escalation of tensions between Russia and the West has prompted a reevaluation of currency usage, with Russian entities increasingly favoring the yuan over traditional Western currencies like the United States dollar and the euro. The imposition of sanctions has constrained cross-border transactions involving euros and dollars, thereby diminishing their prominence in Russia's foreign exchange market.
Data from the Bank of Russia reveals that the turnover of exchange-traded yuan surged to 53 percent in March, up from 46.6 percent in February, marking a notable increase in yuan-based transactions. Similarly, the share of renminbi in over-the-counter trading also reached a record high of 39.6 percent during the same period.
Conversely, the usage of Western currencies experienced a decline, with the combined share of the United States dollar and the euro dropping to 46.4 percent on the exchange and 54.7 percent in over-the-counter trading in March, down from 52.8 percent and 59.8 percent respectively in February.
Analysts attribute this significant shift to Russia's strategic response to international sanctions, which have targeted key sectors of the Russian economy and financial system. The blacklisting of Russian banks, exclusion from the SWIFT messaging system, and restrictions on transactions with Russian entities have compelled Russian businesses and institutions to diversify their currency holdings and transactions.
The trend towards increased utilization of the yuan underscores Russia's efforts to reduce reliance on currencies associated with countries deemed 'unfriendly' amidst escalating geopolitical tensions. As sanctions continue to shape the landscape of international finance, Russia's embrace of the yuan reflects a broader strategic realignment in its economic relations and currency preferences.
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