September 25, 2014 / 8:27 AM / 5 years ago

Yuan trading soars as Russia boosts trade with China: exchange

MOSCOW (Reuters) - Trading volumes in China’s yuan currency have risen almost nine times on the Moscow Exchange this year compared to 2013, its head said, as Russia expands trade with China in response to a chill in relations with the West over Ukraine.

Alexander Afanasiyev, chief executive of the Moscow Exchange, told Reuters that 164 billion roubles ($4.6 billion) worth of yuan had been traded on the exchange so far this year, compared to 18 billion roubles in the same period last year.

“The yuan/rouble pair has taken off like a shot,” Afanasiyev said in an interview at the Reuters Russia Investment Summit.

“Only one thing is limiting its growth: Russian companies don’t have investor status in China, so the demand for the yuan is currently only covering trade needs between Russia and China,” he said.

According to the latest data from the exchange, trading volumes in the yuan/rouble pair have reached 31.1 billion roubles so far in September, compared to 2.4 billion roubles a year earlier.

The volumes still pale in comparison with trading in the rouble/dollar pair, in which an average of $17 billion to $27 billion is traded every day on the Moscow Exchange, but Afanasiyev said he expected yuan/rouble trading to continue making up ground on the greenback as trade ties deepen.

Following Russia’s annexation of Ukraine’s Crimea region in March and the West’s imposition of sanctions over that move and over Moscow’s support for pro-Russian separatists in eastern Ukraine, Russia has pushed to expand ties with Asia, signing a series of trade and business agreements, mainly with China.

The most prominent was one signed by state company Gazprom in May to supply China with $400 billion worth of gas over a 30-year period, although analysts question whether the deal was signed on terms favourable to the gas producer.

Capitalising on the move East, the Moscow Exchange plans to launch trading in yuan/rouble futures, Afanasiyev said, as well as a Hong Kong dollar/rouble currency instrument aimed at Russian firms active in the Chinese autonomous region.

UKRAINE BOOST

Afanasiyev said the Ukraine crisis, coupled with reforms the exchange had made in the past year, had helped boost trading volumes in most asset classes on the exchange, Russia’s largest.

“We are seeing an increase in trading volumes in many instruments, especially in shares and currencies swaps. There is also rising demand for money market products. The market where volumes are down is bonds,” he said at the summit, held at the Reuters office in Moscow.

“Bond volumes are down, it seems, for obvious reasons that issuers aren’t yet ready to borrow at higher interest rates, while investors are cautious to put money into rouble-denominated instruments.”

Russia’s central bank has raised its key rate by a cumulative 250 basis points this year in response to high inflation and market turbulence linked to the Ukraine crisis.

Trading volumes in stocks were up more than 23 percent on the Moscow Exchange in the first eight months of the year, while bond trading volumes were 37 percent lower, exchange data show.

Follow Reuters Summits on Twitter @Reuters_Summits

Additional reporting by Yelena Orekhova and Nikita Pavlov; Writing by Alexander Winning, editing by Elizabeth Piper and Gareth Jones

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