The yuan overtook the dollar in terms of exchange currency trading

The yuan confidently took first place in terms of exchange currency trading, overtaking the US currency. However, in the over-the-counter market, the Chinese currency is significantly inferior to the dollar, even despite the increase in its share. This is also due to large transactions, and the still large share of foreign trade settlements in dollars. Against the backdrop of further reorientation to the East, the share of the Chinese currency in exchange trading may reach 60%.

According to Kommersant’s estimate, based on data from the Moscow Exchange, in June, in currency trading with delivery “today” and “tomorrow”, the volume of transactions in yuan (for rubles) for the first time exceeded the volume of transactions in dollars (for rubles). As a result, the share of the yuan exceeded 41.5%, while the share of the US currency fell below 40%. At the same time, the share of the euro in currency exchange trading stabilized slightly below the level of 20%. At the auction on Wednesday, July 5, the share of transactions with the yuan exceeded 46%, while with the US dollar it was only 34.4%. The volume of trading with the euro amounted to 17.6%.

The share of exchange trading in yuan has been steadily growing since last year. However, according to the statistics of the Central Bank, in the over-the-counter market – in interbank transactions and transactions with non-financial organizations – the yuan loses not only to the dollar, but also to the euro. In particular, in May, the volume of transactions with the yuan amounted to $30.9 billion, while with the dollar twice as much – $61.5 billion, and with the euro – $38.5 billion.

The disproportion of the foreign exchange market is explained by its participants by a number of factors. In particular, investors who actively interact with “non-toxic” currencies, in this case, the yuan, participate in exchange trading. As PSB chief analyst Egor Zhilnikov notes, if there was a mandatory sale of foreign exchange earnings, then “volumes on the stock exchange would be noticeably higher and, most likely, limited the weakening of the ruble, which we have been seeing in recent days” (see “Kommersant” dated July 5) .

According to Tsifra Broker analyst Daniil Bolotskikh, on the Moscow Exchange “it is possible to purchase bonds denominated in yuan from the largest issuers with a yield of 4–5% per annum,” which makes yuan investments on the exchange more attractive than placement on bank deposits. However, as Vladimir Evstifeev, head of the analytical department of Zenit Bank, points out, the share of retail players in the exchange market is relatively low. In May, their net purchases of yuan amounted to only the equivalent of 7 billion rubles, and the main buyers were banks, they purchased Chinese currency for 284 billion rubles.

At the same time, the over-the-counter market, as Vladimir Evstifeev points out, is rather intended “for large transactions to finance a project.” For example, it may be the purchase of currency as part of the buyout of a business from a non-resident. According to Yegor Zhilnikov, the dominance of the dollar in the over-the-counter market is primarily due to “settlements of participants engaged in foreign trade activities, or banks conducting international payments, which are mainly made in US currency.”

At the same time, the share of the American and European currencies paired with the ruble in the over-the-counter market is gradually decreasing. According to Vladimir Evstifeev, since last year it has decreased from 40.5% to 37.9% in the US currency, and from 35.3% to 27.3% in the single currency. At the same time, the share of the yuan in the over-the-counter market increased from 12.1% to 19%.

The share of trading in the yuan will continue to grow in both exchange and over-the-counter trading, market participants expect. And the catalyst for this process will be an increase in the share in yuan in the international settlements of the Russian Federation.

According to Vladimir Evstifeev, the share of exports from Russia in Chinese currency since the beginning of the year has increased from 13% to 23%, while in dollars and euros it has decreased. Yegor Zhilnikov estimates a gradual increase in the share of the yuan in the structure of exchange trading in foreign currency up to 50–60% over the horizon of one to two years. The dollar will continue to dominate over-the-counter transactions, however, the yuan is likely to become more traded next year than the euro, the expert said.

The emergence of new currencies on the stock exchange is likely. However, as Daniil Bolotskikh notes, it is worth considering the potentially low liquidity in such instruments. “To solve this problem, market-making is needed on the part of leading professional participants and banks,” he believes. The theme with the BRICS currency, backed by gold, adds Vladimir Evstifeev, looks more like a long-term process of de-dollarization of the world economy, so for now it is unlikely to significantly affect the trading structure.

Dmitry Mikhailovich