Russian business lobby calls for c. bank to accelerate yuan reserves

BY Reuters | ECONOMIC | 09/30/22 11:26 AM EDT

MOSCOW (Reuters) - Russia's top business lobby called on Friday for the central bank to build up its reserves of the Chinese yuan in a bid to stabilise the rouble, which is susceptible to wild bouts of volatility and has been trading near multi-year highs.

The Russian Union of Industrialists and Entrepreneurs (RSPP) said Russia needed to step up its purchases of the yuan and currencies from other "friendly countries" to help "stabilise" the value of the Russian currency.

The rouble has surged under Moscow's strict capital controls and a slump in imports. Russian businesses say a strong currency dents their competitiveness and the government favours an exchange rate of 70-80 against the dollar.

On Friday, the rouble was trading in a very wide range from 53.20-58.35 against the greenback.

The RSPP said Russia's Finance Ministry should issue yuan-denominated bonds which can then be bought by both the central bank and private investors. Selling roubles to buy foreign currencies should weaken the value of the Russian currency by increasing its supply on forex markets.

Before being hit with unprecedented sanctions, which froze around half of the central bank's international reserves, Russia used to buy tens of billions of dollars worth of foreign currencies and gold every year.

Moscow has since accelerated a campaign to reduce the role of the dollar, euro and other Western currencies in its financial system.

Moscow Exchange, Russia's largest stock market, said earlier this week it expects trading volumes in the rouble-yuan pair on its platform will surpass dollar-rouble deals next year.

In a letter to the finance ministry and central bank, the RSPP also called for the country to "intensify its efforts ... to provide financial institutions of friendly countries access to Russia's exchange infrastructure."

Russia has locked out banks and investors from most foreign markets since February. Moscow considers "friendly" countries those which have not imposed sanctions on Russia since it launched military actions in Ukraine.

(Reporting by Reuters; Editing by Alex Richardson)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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