Yuan-Ruble Trading Set New Records in July at Moscow Exchange FX Market

Internal reforms at the venue, increased demand from Russian firms, efforts to move from the U.S Dollar to direct settlement

moscowThe Moscow Exchange Group, Russia’s main trading venue, announced that new record volumes have been set in the trading of the Chinese yuan/Russian ruble (CNY/RUB) currency pair on its FX Market. As the U.S and EU set to expand the economic sanctions regime placed on the Russian government due to the events in Ukraine, the nation is forced to look to the Chinese market for business opportunities and the importance of the yuan rises in tandem.

The CNY/RUB trading volume at the Moscow Exchange for July 2014 was CNY 3.8 bln (RUB 21.5 bln), a new monthly record. The average daily yuan trading volume in July was CNY 166 mln, also a record. The number of traders conducting operations in the currency in July increased to eighty. The trading volume on July 31 was CNY 665.6 mln (RUB 3.8 bln), the largest daily volume since the launch of yuan trading on Moscow’s Exchange in late 2010. Trades were made in all CNY/RUB instruments: spot trades totalled CNY 212.2 mln, and swap trades came to CNY 453.5 mln. A “long-term” swap with one week maturity was traded for the first time. Twenty-five banks traded the currency during that one day, according to the Russian venue.

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“Development of CNY/RUB instruments is one of the most important growth areas for Moscow Exchange’s FX Market. Increased yuan turnover diversifies our FX Market and broadens the range of instruments and strategies available to members. It also facilitates the use of Russia and China’s national currencies in external economic activities. We expect to see additional growth in yuan liquidity, due in part to long-term instruments, to which we plan to add yuan futures on Moscow Exchange’s Derivatives Market,” said Moscow Exchange’s Money Market Managing Director, Igor Marich.

The increase in yuan liquidity was driven by significant reforms of its FX Market in 2013,  the Moscow Exchange stated in the announcement. These reforms include: partial pre-depositing of funds introduced, the use of yuan as collateral, tom instruments and swaps with maturities of up to six months introduced, trading hours extended, and fees reduced. This brought conditions for trading yuan into line with trading of other major currency pairs on the Moscow Exchange.

Beyond its internal reforms, the analysis at the venue acknowledges the part played by larger economic trends in driving yuan trading volumes to new all-time highs. Andrey Dorfman, senior trader at Bank of Moscow’s FX and interest instrument and derivatives department, explained that CNY/RUB turnover will continue to grow because of the increasing demand for Asian currencies from Russian market participants, efforts to move from the dollar to direct settlement, and the need to use the Exchange as an instrument to manage counterparty risk.

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