Author: Elena Fabrichnaya

MOSCOW (Reuters) – Major Russian banks have asked the central bank to take action to counter a yuan liquidity shortfall that has pushed the rouble to its lowest level since April against the Chinese currency and pushed yuan swap rates into triple digits.

The ruble fell almost 5% against the yuan on September 4 on the Moscow Stock Exchange (MOEX) after the Finance Ministry’s plans for currency intervention suggested that the central bank’s daily sales of yuan would fall to the equivalent of $200 million in the coming month.

The central bank has been selling yuan worth $7.3 billion a day over the past month. The pointed decline coincided with a bond issuance by oil giant Rosneft worth 15 billion yuan, which also weakened market liquidity.

“We cannot borrow in yuan because we have nothing to cover our currency positions with,” said Sberbank CEO German Gref, emphasizing that the central bank must participate more actively in the market.

The yuan became the most traded currency on the MOEX exchange after Western sanctions halted the exchange of dollars and euros, and many banks developed yuan-denominated products for their clients.

Yuan liquidity is mainly provided by the central bank through daily sales and overnight yuan swaps, as well as through foreign exchange sales by export companies.

Meanwhile, Chinese banks in Russia are avoiding currency trading for fear of secondary sanctions from the West.

In early September, banks raised a record 35 billion yuan from the central bank through overnight swaps.

“I think the central bank can do something. Let’s hope they understand the need to increase the liquidity provided through swaps,” said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should also sell more yuan.

The acute shortage of yuan also follows months of delays in payments for trade with Russia by Chinese banks, which have become wary of dealings with Russia following U.S. threats of secondary Western sanctions. Those problems peaked in August when billions of yuan were stuck in limbo.

Russia and China are discussing a common bilateral payment system, but there is no breakthrough in sight. VTB’s Kostin said that since Russia’s trade with China is balanced, establishing a settlement mechanism for payments in national currencies should not be a problem.