The yuan exchange rate on the Russian market has reached its annual maximum
The yuan exchange rate on the Russian market reached a new annual maximum amid reduced investor activity. This is partly explained by the dynamics of the global foreign exchange market, as well as internal factors: a decrease in sales of foreign exchange earnings and difficulties with cross-border settlements. In the coming weeks, the volume of transactions of major participants in the over-the-counter foreign exchange market will increase, which will inevitably lead to increased trading volatility.
Participants in the foreign exchange market began the last day of September 2024 by playing to depreciate the ruble exchange rate. At the opening of trading on the Moscow Exchange, the yuan rate rose to almost 13.32 rubles/CNY, reaching a maximum since October 18 last year. Despite the fact that it did not stay at this level, at the end of the day the Chinese currency exchange rate was 13.24 rubles/CNY, at the closing level on Friday. At the same time, the exchange rate remained almost 1.2 rubles. higher than the values at the end of August.
The rapid growth of the Chinese currency on the Russian market occurs against the backdrop of the strengthening of the yuan on the world market. Last week, the dollar fell to 7.01 CNY/$, its lowest since October 2023, according to Investing.com. On Monday, the rate consolidated around 7.018 CNY/$, which is 1% lower than the values at the end of August. Among the reasons for this strengthening, the head of the analytical department of Zenit Bank, Vladimir Evstifeev, notes the easing of the Fed’s monetary policy, which puts pressure on the American currency, as well as the introduction of new measures by the Chinese authorities to support the economy and the stock market, which have already caused an influx of foreign capital in China.
Internal factors also contribute to a stronger growth of the Chinese currency in Russia, including a decrease in the supply of foreign currency from exporters against the backdrop of falling oil prices. In early September, the price of Brent oil fell below $69 per barrel (the minimum in almost three years). Even taking into account the return of prices to $71.8 per barrel, they remain 6.5% below the levels of the end of August. “The activity of importers, on the contrary, increases seasonally, which causes an increased need for yuan. Disruptions in external payments could also accumulate the effect of deferred demand, which puts pressure on the Russian currency,” notes Mr. Evstifeev.
The weakening of the ruble occurs with reduced activity of large market participants. According to Kommersant’s estimates, based on data from market participants, at the end of September, the total volume of yuan trading on the Moscow Exchange in the “tomorrow” mode amounted to about 2.1 trillion rubles, which is 9% lower than the August values. The average daily trading volume in September decreased by 7.5%, to RUB 98 billion.
The low trading activity at exchange trading is primarily based on growing infrastructure risks. In August, Chinese banks tightened payment terms in anticipation of US sanctions against the Moscow Exchange coming into force on October 12. “The approach of this date contributes to the transition of foreign trade participants and active speculative players to the over-the-counter market. That’s why in September we didn’t see the traditional surge in trading activity at the peak of the tax period,” says Evgeniy Loktyukhov, head of the economic and industry analysis department at PSB. According to the chief analyst of Sovcombank, Mikhail Vasiliev, negative factors for the ruble “are geopolitical and sanctions risks, capital outflow, increased budget expenses, which, among other things, go to finance imports.” According to his assessment, in October the yuan exchange rate could be in the range of 12.8–13.7 rubles/CNY, the dollar exchange rate in the range of 90–96 rubles/$.
