Summary:
After the suspension of transactions between the dollar and the euro, did the real exchange rate of the ruble rise or fall? Why did the Russian Central Bank announce that "the RMB exchange rate against the ruble will become the benchmark of other currencies"? Why did the yuan, declared as the benchmark exchange rate, fall 0.58% against the ruble? Why was Hong Kong dollar trading stopped after the imposition of sanctions on the Moscow Exchange? Is it good or bad for us that RMB has become the main foreign exchange in Russia's foreign exchange market?
1、 After the suspension of transactions between the dollar and the euro, did the real exchange rate of the ruble rise or fall?
The Moscow Times reported on Saturday that the rouble resumed its decline against the US dollar in the over-the-counter market of Russian commercial banks on Friday, the day after the Moscow Stock Exchange stopped trading in US dollars and euros due to sanctions.
As of 18:15 on June 15, Moscow time, the central bank of Russia gave the dollar central parity rate for over-the-counter transactions in Moscow to 89.9 rubles, 2.03 rubles higher than the level at the close of the previous day, down 2.3%.
However, on June 16, Alexei Antonov, an analyst with Russia's Alor Broker, commented on the telegraph channel that Reuters' news reports were not true information about Moscow's OTC dollar trading. Because the central bank's middle price is only the basis for the Russian government and enterprises to convert into the local currency ruble when processing the data of dollar pricing, not the price for commercial banks to purchase or sell dollars.
Alexei Antonov posted a picture of the announced price of OTC foreign exchange transactions of Russian commercial banks on June 15 in his post. The photo shows that on Friday morning, Rose Bank bought your dollars at 52.8 rubles and one dollar. Then sell it to you for USD at the price of 132.4 rubles. According to this price, compared with the closing price of USD 89.592 on the Moscow Foreign Exchange Exchange on Wednesday, the selling price of USD against ruble soared by 47.8%, but the purchase price plummeted by 37.9%.
Alexei Antonov commented that although the Russian Central Bank reassured the Russians that in the short term, the ruble was almost risk-free. The country's balance of payments remained positive, that is, the inflow of money into the country exceeded the outflow. He also said that "the new package of sanctions will intensify the pressure on Russian imports, but will also lead to the expansion of export foreign exchange earnings surplus", which may even strengthen the ruble, because because of sanctions, capital outflows and foreign currency outflows used to purchase foreign goods may remain "suppressed" for weeks or even months.
But in fact, the current price of ruble is close to the price of single high-quality toilet paper for wiping saliva. This is another small achievement of Peter the Great II. There is no doubt that panic is coming - the ruble is expected to collapse.
He also warned that it is important to monitor the response of friendly banks to the increased threat of secondary sanctions, which may affect the availability of friendly currency transactions, or even the mutual transactions of rubles.
Janis Kluge, a researcher at the German Institute for International Security, said that in the long run, the new US sanctions will reduce the transparency of Russia's economy and significantly increase the transaction costs of Russia's foreign trade.
2、 Why did the Russian Central Bank announce that "the RMB exchange rate against the ruble will become the benchmark of other currencies"?
On Thursday, June 14, when the Russian Central Bank announced that the Moscow Foreign Exchange Exchange would stop the floor trading of dollars and euros, it specifically stated that "the RMB/ruble exchange rate will set the trajectory for other currencies and become the benchmark for market participants".
The central bank of Russia explained that in the past two years, the role of the dollar and the euro in the Russian market has been declining. This is because of "the reorientation of trade flows to the East and the change of settlement currencies from countries that have not joined the Western sanctions against Russia to friendly countries such as the ruble, RMB and other currencies".
When commenting on the statement of the Russian Central Bank, the Russian Businessman said that after the war against Ukraine, the economic ties between Moscow and Beijing were closer. It will reach a record $240 billion in 2023, which is an important support for Russia to get rid of the western dominated global financial system.
With the help of the local currency settlement mode between Russia and China, after the substantial growth of Sino Russian trade, the trading share of RMB in the Moscow Exchange in May was 54%, which has become the main currency traded on the Exchange.
Previously, the trading volume of the US dollar against the ruble in the Moscow Exchange was about 1 billion rubles per day, while the trading volume of the euro against the ruble hovered around 300 million rubles, far below the daily trading volume of the RMB against the ruble, which usually exceeded 8 billion rubles.
Therefore, after the exit of the Russian favorite US dollar and euro, the RMB/ruble exchange rate will become the set track of other currencies' exchange rates and the benchmark of foreign exchange market participants.
The Businessman highlighted in its comments that it is not that Russians like the RMB to surpass the US dollar and the euro, but that they are unable to trade the US dollar and the euro on the spot due to sanctions.
3、 Why did the yuan, which was declared as the exchange rate benchmark, fall 0.58% against the ruble after the US dollar and the euro stopped trading?
On Friday, the ruble on the Moscow Exchange strengthened significantly against the RMB, and the RMB fell 0.58% to 12.15 yuan per ruble, 1.6% lower than the 1:12.3463 in the Chinese foreign exchange market that day.
There are two reasons for the decline.
First, the supply of RMB was too large on the first day when the floor trading of US dollars and euros was stopped.
On Friday, Russian commercial banks launched 14.234 billion yuan borrowed from the central bank overnight.
The Russian Central Bank is worried that after the suspension of the floor trading of US dollars and euros, the market demand for US dollars and euros will turn to RMB, which will lead to a sharp rise in demand for RMB. In response, the regulator decided to expand the limit of swap transactions, within which it lent RMB in the form of ruble pledge. From Friday, June 14, its maximum trading volume is 20 billion yuan per day. A large amount of RMB was put into the market, leading to a sharp decline in the price of RMB against the ruble.
According to the data of "currency swap transactions of selling foreign currencies in rubles" published on the official website of the Russian Central Bank, on Thursday, June 13, Russian commercial banks applied to the Russian Central Bank for a record RMB loan. As part of the currency swap operation, credit institutions borrowed 14.234 billion yuan from the Central Bank of Russia, equivalent to 174.24 billion rubles.
According to the Russian media Frank MEDIA, the background of such operation of Russian commercial banks is that after the announcement on Wednesday night to stop the floor trading of dollars and euros, many Russians, out of security needs, transferred RMB in foreign currency accounts of Russian commercial banks to Russian branches of Chinese banks. As a result, Russian commercial banks were seriously short of RMB. It was almost impossible to borrow RMB in Russia's inter-bank market on Thursday. The overnight interest rate of RMB in the inter-bank market soared to 27% every year. It was not until Thursday night that the Russian Central Bank lent 14.234 billion yuan that the overnight interest rate of the RMB fell to 6% of the normal level on Friday.
Second, the market worried that after the US dollar and the euro, the Moscow Exchange might be forced to stop RMB trading.
After the Russians found that the exchange stopped trading in dollars and rubles on Thursday morning, the Russian foreign exchange market generally worried whether the Bank of China would continue to cooperate with the Russian foreign exchange exchange and the national clearing center after the Russian National Clearing Center, the Moscow foreign exchange trading platform and their structures were sanctioned by the United States.
Sergey Romanchuk, former president of ACI Russia, said in the telegraph channel analysis that after the implementation of sanctions, some organizations in the trading chain may reconsider their relations with exchanges and their departments. This may be because foreign counterparties need time to assess the risk of secondary sanctions. He expressed pessimism that it is also possible for the Moscow Exchange to stop RMB trading to avoid the risk of secondary sanctions.
On June 14, Reuters also reported that a Russian central bank source familiar with the situation told reporters that after the Moscow Exchange stopped trading, the branches of large Chinese banks in Russia also stopped settlement of dollars and euros on Thursday.
4、 Why was Hong Kong dollar trading stopped after the imposition of sanctions on the Moscow Exchange?
After the United States imposed sanctions on the Moscow Exchange on June 12, the Moscow Exchange not only stopped trading US dollars and euros on Thursday, but also stopped trading Hong Kong dollars in Hong Kong, China, one of the parallel import bases for Russians to avoid western export restrictions. Why does this happen?
The news that the Russian Central Bank announced its decision to suspend Hong Kong dollar trading came after the Moscow Exchange, together with the National Clearing Center (NCC) and the National Settlement Depository (NSD), were subject to US sanctions. In theory, these restrictions should affect only the dollar. At the same time, the Moscow Exchange also decided to stop the exchange trading of euros, because EU countries generally comply with and will soon follow up the US sanctions against Russia. Due to the close relationship between the Hong Kong dollar and the US dollar, it was also stopped by the Russian Central Bank.
Elusory Central Bank said in a statement, "Hong Kong dollar is linked to the US dollar, and banks that settle in this currency have traditionally adopted quite strict compliance regulations and extended the settlement time. Therefore, in order to reduce risk, they decided to suspend Hong Kong dollar transactions".
On Wednesday, June 12, the US Department of Finance announced a significant expansion of financial sanctions against Russia, including the Moscow Exchange, the National Clearing Center (NCC) and the National Clearing Depository on the blacklist. Since June 13, the exchange has stopped trading US dollars, euros and Hong Kong dollars, and the central bank has started to set the official exchange rate according to the OTC market.
In addition to sanctions on exchanges, the United States also added the largest branches of Russian state-owned banks in India and China to the SDN list, including Sberbank, VEB, defense Promsvyazbank and VTB representative offices.
On June 14, the UK also announced that it had joined the US sanctions against the Russian stock exchange.
5、 Is it good or bad for us that RMB has become the main foreign exchange in Russia's foreign exchange market?
On the surface, RMB has finally unified the Russian foreign exchange market and become the benchmark of Russia's main foreign exchange and foreign exchange rate. It seems that RMB internationalization has taken an important step. However, from the market situation on the first day when the Russian foreign exchange market stopped trading US dollars on the floor, it is far from what we see on the surface.
We use strong economic support to promote RMB in Russia. It is difficult to awaken the worship of dollars, euros and pounds in the eyes of Russians. So every month, we can see the news of Russia selling RMB and buying dollars from the Russian Businessman or Interfax News Agency.
But in order to help Russians accept RMB, the United States only used one move, that is, to put several Russian exchanges on the blacklist of financial sanctions. Overnight, the Russian Central Bank announced that it would abandon the dollar, euro and pound, replace these toxic currencies with RMB, and predicted that RMB would become the main foreign currency of Russia after replacing the toxic currency.
So, we should make a contribution to the United States in promoting Russia's RMB nationalization. Thanks for their divine assist. But at the same time, we need to be sensible to see that the main foreign currency of Russia is not for competitiveness, but for the active withdrawal of dollars and euros. There is no tiger in the mountain, and monkeys are called overlords. This is nothing to show off.
In addition, Russians have to gradually learn to accept the RMB. After all, the economic scale and population size supporting the RMB are ten times larger than the ruble. Although it is not freely convertible like the ruble, the stability of the RMB is much stronger than the ruble.
Finally, we should recommend a new way to obtain toxic currency to the Russians. In Russia, you can exchange rubles for RMB, and then go to the border cities of China and Russia for a one-day tour. According to the maximum exchange rate of tourists in China, you can exchange dollars. This price must be a little higher than the exchange price, but it must be cheaper than the black market price of dollars in Moscow.
[Author: Xu Sanlang]
