Business Insider: "Forex transactions in Russia have come to be done almost exclusively in yuan"

Currency transactions in Russia have come to be done almost entirely in yuan, after sanctions imposed by the United States forced the country's main stock exchange to cut ties with the dollar and the euro, Business Insider writes, citing a Bloomberg report.

In June, yuan transactions accounted for 99.6 percent of the country's foreign exchange trading volumes, compared to just 53.6 percent a month earlier, according to a report by Russia's Central Bank. In the middle of last month, new US sanctions targeted the Moscow Stock Exchange (MOEX), the country's main center for financial transactions.

In addition, restrictions were also imposed on two other entities that facilitate the use of the US dollar in Russia. In response, MOEX banned the exchange of dollars and euros, closing a market that has been active since the Cold War, writes Business Insider.

According to the Bank of Russia report, the average daily volumes of the Russian foreign exchange market contracted by almost a third in the second half of the month, and as transactions in dollars or euros were absent, the yuan gained massive ground.

Russians are still free to buy Western currencies through the interbank or over-the-counter markets, but these options are expensive. In addition, yuan transactions have also increased here, with its share of OTC exchanges reaching 40% of the market, according to Bloomberg.

Alexandra Prokopenko, a sociologist and fellow at the Carnegie Russia Eurasia Center, predicted shortly after the US Treasury imposed sanctions that the Russians would have to find a stable currency alternative, and as the yuan was increasingly used as a result of stronger ties between Moscow and Beijing, it will win.

"The new sanctions make the yuan the main currency of foreign exchange transactions and settlements in Russia," she said, according to Business Insider.

Furthermore, the sociologist believes that this may mark a slow but permanent shift away from the global dominance of the dollar. On the other hand, increased Russian demand for the Chinese currency has created a liquidity shortage in the yuan, according to a Bloomberg report.

American sanctions also have an impact on Chinese banks, as many large dealers conclude transactions with Russia in yuan, Business Insider also writes.