Sergey Bobylev/Pool/AFP/ Getty Images
- Moscow adopted the yuan-to-ruble exchange rate as benchmark after the US expanded sanctions against it.
- The US sanctions forced the Moscow Exchange to end dollar and euro trading, causing market confusion.
- Russia's central bank reports yuan is now the main currency, accounting for 54% of trades.
Moscow is adopting the Chinese yuan-to-ruble exchange rate as its benchmark currency pair after the US expanded sanctions against Russia on Wednesday, the country's central bank said on Thursday.
The new restrictions target any global financial institution processing transactions with Russia. They also take aim at investments in Russian stock exchanges.
The new US sanctions prompted the Moscow Exchange to end dollar and euro trading on Thursday, causing confusion — since the exchange rate is now opaque. Some lenders in Russia stopped selling US dollars altogether, while the dollar-ruble rate spiked at some local banks.
Russia's central bank appeared to seek to calm the market in a statement on Thursday. It said the role of the dollar and the euro has declined "consistently" in the last two years, according to TASS, the state news agency.
The central bank added in its statement to Russia's RBC News that the yuan has become "the main currency" on the Moscow Exchange. The yuan accounted for 54% of currency trades in May. It will "set the trajectory for other currency pairs" and be the guideline for market participants, the central bank said.
Russia's use of 'friendly currencies' and the ruble for trade has risen
Russia has been seeking alternative trading partners and payment systems since the West hit the country with sweeping sanctions following its invasion of Ukraine in February 2022.
Russia's central bank said on Thursday that the currencies from "friendly countries" and the ruble now account for as much as 80% of Russia's foreign trade payments.
Russian leader Vladimir Putin himself doubled down on his call to phase out the use of the US dollar and other "toxic" currencies earlier this month.
Moscow is also working with the BRICS bloc of major emerging countries on a payment platform to bypass the use of the US dollar — the world's dominant reserve currency for decades.
Meanwhile, countries around the world are also diversifying their assets and chipping away at the dominance of king dollar over fears that — like Russia — they could be shut out of the dollar-based global financial system should sanctions hit.
However, the greenback is so entrenched and pervasive that very few actually think it can be dethroned.