This Russia Buying Chinese Yuan To Diversify Away From Dollar, Euro

07/07/2016 20:00 AST

Russia's central bank has started buying the Chinese yuan to diversify its foreign-currency reserves away from the euro and U.S. dollar and become less vulnerable to Western sanctions.

At the end of September 2015 the yuan had not figured in the central bank's foreign currency assets, but the bank said on July 4 that by the end of 2015 the yuan accounted for 0.1 percent of its reserves.

Prior to Russia's move, only a small group of countries, most of them in Asia, had purchased the Chinese currency for reserves.

Moscow and Beijing are political allies who have drawn closer since Western nations imposed sanctions on Russia over its 2014 annexation of Ukraine's Crimea. Russian President Vladimir Putin visited Beijing on June 25.

A Russian central bank spokeswoman said yuan assets did not yet count as part of Russia's official gold and forex reserves, since the International Monetary Fund has not yet granted the yuan such reserve status.

But it is set to get that status in October, in what is seen as an important milestone for China's recognition as a global economic power.

The share of the U.S. dollar in the Russian bank's foreign-currency assets was unchanged over the fourth quarter at 47.5 percent.

The share of the euro fell from 38.9 percent at the end of the third quarter to 37.0 percent at the end of the fourth, while the share of the British pound rose from 9.5 percent to 9.9 percent.

Russia has been striving to diversify its reserves, including by buying gold, to make its economy more resilient to external pressure such as sanctions.

Russia's economy is stabilizing after a steep recession of 3.7 percent last year prompted by a collapse in international oil prices and Western sanctions.

Big News Network