Russian Banks Urge Central Bank Action to Counter Yuan Liquidity Deficit
In a recent development that has rocked the financial markets, major Russian banks are calling on the central bank to address a yuan liquidity deficit. This has caused the rouble to plummet to its lowest level against the Chinese currency since April, with yuan swap rates soaring into triple digits.
On September 4, the rouble experienced a nearly 5% decline against the yuan on the Moscow Stock Exchange (MOEX) following the finance ministry's announcement of reduced forex interventions. This implied a sharp decrease in the central bank's daily yuan sales to just $200 million, down from the previous $7.3 billion.
The liquidity crunch was further exacerbated by oil giant Rosneft's 15 billion yuan bond placement, which drained liquidity from the market. Russian banks are feeling the strain, with Sberbank CEO German Gref emphasizing the urgent need for the central bank to play a more active role in stabilizing the situation.
The yuan has emerged as the dominant foreign currency on MOEX due to Western sanctions disrupting dollar and euro exchange trade. Many banks have responded by offering yuan-denominated products to their clients.
However, the current yuan liquidity shortage is a cause for concern, with many Chinese banks in Russia hesitant to engage in currency trading due to fears of additional Western sanctions. In response, Russian banks recently obtained a record 35 billion yuan from the central bank through one-day swaps.
Looking ahead, VTB CEO Andrei Kostin believes that the central bank must step in to increase liquidity through swaps and encourage exporters to sell more yuan. This comes amidst ongoing discussions between Russia and China regarding a joint payment system, although progress has been slow.
In conclusion, the yuan liquidity deficit poses significant challenges for both Russian banks and the broader financial market. Investors should closely monitor developments in this area, as they could have far-reaching implications for currency exchange rates and trade relations between Russia and China.