Russian plans to buy Yuan and other foreign currencies

Washington/Moscow: Russia is exploring options to overcome sanctions imposed by the West. One of the options is that Russia is planning to buy large amounts of foreign currency. Leading US website Bloomberg has claimed that Russia is planning to buy currencies of friendly countries, which include the Chinese Yuan. Following this report, the Chinese Yuan, Turkish Lira, and Indian Rupee have appreciated.

Over the last decade, Russian President Vladimir Putin has initiated a policy to reduce US dollars from foreign reserves of Russia due to sanctions imposed by the US. After the Ukraine war broke out, Western countries froze Russian foreign reserves. Subsequently, Russia accelerated the reduction of US dollars from its reserves and started to replace it with alternate currencies and payment systems.

At the meeting of the BRICS countries held two months ago, the Russian President openly announced that BRICS was working on an international reserve currency and an alternative payment system. Later the Russian agencies indicated that an agreement was being worked out with India, Iran, and Turkey regarding the use of currency and trade transactions. At the Eurasian Economic Union meeting held last month, it was also announced that the use of national currencies for mutual trade is being proposed.

Given this background, Russia’s indication to purchase foreign currencies is noteworthy. According to a report by Bloomberg, Russia is planning to buy foreign currency for about $70 billion. The Chinese Yuan will certainly be preferred, but there is no clarity on which other currencies will be added. However, currencies from friendly countries, mostly part of BRICS, along with Iran and Turkey, are likely to be considered. However, there is no confirmation yet.

Bloomberg said that the intention of purchasing the foreign currency is to weaken the Rouble against the US dollar. Currently, the forex rate is 60 Russian Ruble for a dollar. It is predicted that the Ruble will depreciate to 75 to 80 after Russia starts purchasing foreign currencies. Russia’s central bank and senior government officials have approved the plan to buy foreign currency. However, other details and the timeline of implementation are not yet known.