Written by Elena Fabrichnaya
MOSCOW (Reuters) – Russia’s top banks have called on the central bank to take action to address a liquidity shortage in the yuan that has sent the rouble to its lowest level since April against the Chinese currency and pushed yuan swap rates into the single digits.
The ruble fell about 5% against the yuan on Sept. 4 on the Moscow Stock Exchange after the Finance Ministry’s plans to intervene in the foreign exchange market indicated that the central bank’s daily sales of the yuan would fall next month to the equivalent of $200 million.
The central bank has been selling $7.3 billion worth of yuan a day over the past month. The decline coincided with oil giant Rosneft’s issuance of 15 billion yuan of bonds, which also drained liquidity from the market.
“We cannot lend in yuan because we do not have the means to cover our foreign currency positions,” said Sberbank CEO German Gref, stressing that the central bank needs to participate more actively in the market.
The yuan has become the most traded foreign currency on the Shanghai Stock Exchange after Western sanctions halted trading in dollars and euros, with several banks developing yuan-denominated products for their clients.
Liquidity in the yuan is provided mainly by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by issuing companies.
Meanwhile, Chinese banks in Russia are avoiding currency trading for fear of secondary Western sanctions.
In early September, banks raised a record 35 billion yuan from the central bank through overnight swaps.
“I think the central bank is capable of doing something. We hope they understand the need to increase liquidity supply through swaps,” said Andrei Kostin, chief executive of VTB Bank, the country’s second-largest lender, adding that exporters should also sell more yuan.
The acute shortage of yuan comes after months of delays in payments for trade with Russia by Chinese banks, which have become wary of doing business with Russia after the US threatened secondary Western sanctions. Those problems came to a head in August when billions of yuan were left in limbo.
Russia and China are discussing the creation of a joint system for bilateral payments, but there does not seem to be any progress in sight. Kostin of VTB Bank said that trade between Russia and China is balanced, so creating a clearing mechanism for payments in national currencies would not be a problem.
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