Russian companies replenished their foreign currency accounts and deposits by $4.4 bln in July. Experts explain the trend by problems with settlements for foreign trade activities as well as banks’ interest in attracting yuan.
In July 2024, Russian legal entities notably bolstered their foreign currency accounts with Russian banks, with an increase of 3.7%, or $4.36 bln, according to the Bank of Russia statistics. This is the most significant increment since May 2022 when their forex balances surged by $6.11 bln (4.2%). The balance of corporate bank accounts denominated in foreign currency has been mostly declining since then.
However, in January-July 2024, they showed growth of $6.7 bln, reaching $121.86 bln.
The increase in Russian banks’ foreign assets was primarily due to the contribution of high-interest deposit accounts, explains Alexander Shneiderman, head of sales and client support at Alfa-Forex.
Banks from the top 20 open yuan deposits at 5-6.7% per annum, which is actually twice as high as what Chinese banks can offer their own citizens. In July 22, People’s Bank of China cut its Loan Prime Rate, the key lending rate in China, to 3.35%, and has generally maintained it at this level since then. Today, average bank deposit yields in that country range from 0.35% to 3.15%, the expert notes.
“Now that foreign currencies have been split into friendly and unfriendly ones, the yuan has actually become the only alternative to the dollar and the euro as a tool to diversify savings. Being a high-liquidity asset, the yuan enjoys popularity among the Russians,” Alexander Shneiderman emphasizes.
Additionally, from September 6 to October 4, the Ministry of Finance resumed large-scale purchases of foreign currency and gold under the budget rule. On one hand, increasing the country’s gold and foreign exchange reserves serves as a tool to protect the economy from inflation and strengthen the national currency. On the other hand, purchasing foreign currency helps offset the growing yuan shortage, as interest from both individuals and businesses continues to rise.
“The issue of difficulties with international transactions for Russian importers remains unresolved, with Chinese banks approving fewer transactions due to fears of sanctions,” the expert concluded.