Bank of Russia added yuan to reserve currency basket

30 November,, Paris – According to the Russian news agency Tass, two sources close the Central Bank of Russia has informed that the bank already added the Chinese yuan to its reserve basket as of mid-November. Marking a move before today’s decision of the International Monetary Fund’s (IMF) to include the yuan to the Special Drawing Rights (SDR) basket. However, the press service of Russia’s Central Bank has indicated that the composition of reserves is to be officially unveiled with a six months delay. Hence, it is not confirmed if the Bank of Russia added yuan to reserve currency basket. 

Yet, according to the two sources, the share of Russian reserves in the Chinese yuan is to remain small and symbolic for the near term. That’s why they have stated that at the moment, the Central Bank of Russia has not carry out operations on the physical buying of the Chinese yuan, while it is also not planning to purchase operations of yuan-nominated assets. Therefore, no actual signs and evidence of the yuan inclusion by the Bank of Russia is noticed at the moment.

Opposition against the yuan inclusion

Providing more details upon the inclusion of the yuan, both sources told that a number of the bank’s board members were against the inclusion of the yuan in the basket. Especially, Mr. Ksenia Yudaeva, the First Deputy Chairman of the Central Bank noted that the yuan is unusable in the formation of international reserves due to its non-reserve status.

As it is essential that the currency used for the investment of reserves needs to be free floating. However, with the IMF having approved the yuan to the SDR today, the yuan is meeting the yardstick to be “freely usable”. It seems like the opposition has been overruled correctly. 

The benefits for Russia

Even though the yuan inclusion is not confirmed yet, the move comes is very logical. Considering that it would further facilitate both countries to engage in investing and buying of national denominated currency assets. Especially, for Russia this would alleviate the deficit in technologies, petroleum and gas per the restrictions to western markets brought on by sanctions after the events in Ukraine.

Now that the IMF has added the yuan to the SDR basket, it doesn’t matter anymore if the Bank of Russia yuan is confirmed or not. The yuan’s new status will not be neglected, hence it is likely that the Bank of Russia will have the yuan in its reserve currency basket eventually.

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