The recent war between Ukraine and Russia has brought a wide range of sanctions and limitations for the Russian government. In that sense, the Russian government started looking for several ways to overcome those sanctions as it goes through this war.
Some of the most interesting news to come around this week involve Saudi Arabia considering using the Yuan instead of the US dollar as a currency for oil deals and Russian customers being able to use Yuan to pay for the FESCO Transportation Group.
Tension in Russia is arising more each day, and it’s vital for everyone interested in the financial world to be up to date on everything that happens. Keep reading if you want to know more about Yuan’s involvement in Russia’s recent sanctions.
Chinese Yuan’s Value Increased After a Recent Report from Saudi Arabia
Overall, the Chinese Yuan has experienced its ups and downs over the past few months. However, a recent report by Dow Jones implies that the Saudi Arabia government is currently talking with representatives in Beijing about the possibility to make some oil sales to China in its local currency.
Right after this report went live, the Yuan jumped from 6.3867 per dollar, which is considerable since the asset hadn’t reached that amount since the Asian trading event. Before the Saudi Arabia report came in, the Chinese Yuan had already experienced a drop of 0.3% in the North American markets, which is a hard hit for the Chinese economy.
The US Dollar As the Primary Exchange Currency in Oil Trading
As several financial experts already know, the primary currency governments use for global trade and oil markets is the US dollar. However, the “Renminbi,” which is the official name given to the Yuan token, has started being considered for cross-border transactions.
Does this mean that the Yuan will replace the US dollar in global market trades? It’s not likely. However, the fact that the Yuan is pointing out to become stronger shortly gives us a strong impression that it will become more widely used in the future.
Why Has the Yuan Increased in Value?
As mentioned before, the outbreak of war in Ukraine has brought several sanctions to the Russian government. Many people know that China has a particular relationship with Russia, so governments are currently looking for alternatives to the US-based markets as a solution to avoid sanctions.
Moreover, Saudi Arabia’s discussion with Beijing may have also happened due to the fact that it currently doesn’t have the best relationship with the US government; this may be due to Yemen’s civil war or other negotiations surrounding nuclear war coming from Iran.
The Chinese Yuan Hadn’t Been Doing Well Before the Dow Jones Report
While the Dow Jones report didn’t specifically say that Saudi Arabia was starting to use the Yuan for global trades right away, it did implicate that there’s a great possibility it will happen if the sanctions keep happening.
Chinese assets hadn’t been doing well before this report. Overall, the “Renminbi” fell more than 1.1% against the US dollar; this happened in a lapse of three days. According to several sources, this is one of the worst price drops the Chinese asset has experienced in the year.
However, the current price increase may give the Yuan the impulse it needs to become a widely-used asset worldwide. Only time will tell.
Russia Is Planning on Using the Chinese Yuan to Pay for Foreign Debt
In other related news, recent sanctions to the Russian government have blocked Moscow’s access to its reserves holding euros and US dollars, which is a strong hit to the Russian economy. This information was brought to light through Russia’s Finance Minister, Anton Siluanov.
As Siluanov stated in his speech, the Russian government may be planning to use the Chinese Yuan from its Forex exchange reserves to pay for Eurobond in coupons in an attempt to solve the debt issue. In case the payment request is rejected by the Western banks, the Russian government may be considering paying in Russian rubles.
However, this information is still in development, and there’s no current outcome to this situation.
Russian Customers May be Able to Pay for FESCO Transportation Group Fees with Yuan
The FESCO transport group is the largest transport operator system in Russia. Recent sanctions have given this group a considerable hit, financially speaking. Many businesses alongside FESCO have struggled to keep up with finances due to all the blockages that have happened over the past few weeks.
However, the FESCO transport group has recently released a statement where it offers customers other payment methods other than euros or US dollars; this includes the Chinese Yuan.
While it’s not clear when FESCO it’s going to start applying this measure to its international sales, it’s likely that it will happen soon as tension in Russia’s finances keeps increasing.
What Does It All Mean for the Chinese Yuan?
Over the past few weeks, Chinese businesses have looked at alternatives to reduce the impact of sanctions on their relationship with Russian businesses. One of these solutions is making transactions with the Chinese Yuan.
While it’s hard to make assumptions right now considering everything that happens each day, it’s safe to assume that the Yuan is gaining strength and will likely keep getting stronger as the weeks and months go by.
Make the Most Out of the Chinese Yuan
Many investors believe today is the perfect opportunity to invest in the Chinese Yuan. Its value is starting to increase, so it may become harder and more expensive to get it in the future.
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