This change is primarily driven by the diminishing interest in foreign currency deposits and the growing appeal of the Chinese currency in Russia.
The decline of dollar and euro deposits in Russia
Anna Romanenko, Director of the Communications Department at Vyberu.ru financial marketplace, revealed that approximately half of all foreign currency savings in Russian banks were transferred to foreign credit institutions in 2022.
Consequently, interest in new deposits has significantly decreased. The number of banks offering foreign currency deposits in Russia has also declined, with only around three dozen remaining.
Romanenko stated that online requests for dollar and euro deposits reached a two-year low in January. However, interest in the dollar resurged in March due to the ruble’s weakening, with the number of requests increasing by 30%.
In contrast, demand for the euro remains minimal. She emphasized that the functionality of European and American currencies has considerably narrowed, with limits on withdrawals and conversion restrictions in place.
Chinese yuan gaining traction as an alternative
Romanenko suggests that the Chinese yuan is emerging as an attractive alternative to the dollar and euro. Currently, 49 Russian banks offer yuan-related services, and interest in the currency has tripled within a month, with weekly increases of 15-20%.
The growing appeal of the yuan is partly due to improved deposit rates, which can now reach up to 3%.
Additionally, there is potential for increased demand for deposits in Indian rupees, as three banks in the country have introduced such offers this year.
Anatoly Pechatnikov, Deputy President and Chairman of the Board of VTB Bank, predicts that depositors may almost entirely abandon dollar and euro savings within the next 2-2.5 years.
The yuan’s impact on the Russian savings landscape
In March, the yuan overtook the euro as one of the top three currencies for Russian savings. According to a Finam study, a year after sanctions were imposed, 17% of individuals held money in Chinese cash, while 8% opted for European cash.
Despite this shift, the ruble remains the most popular currency for cash savings, chosen by just over a third of Russians (34.9%).
The rising prominence of the Chinese yuan in Russia’s financial landscape signifies a changing dynamic in international currency preferences.
As the US dollar and Euro lose their appeal due to restrictions and reduced functionality, the yuan is quickly filling the void. This shift has implications not only for the country’s economy but also for global financial markets.
As the Chinese yuan continues to gain traction in Russia, it’s essential to monitor how this change affects the country’s financial landscape and international relations.
With the US dollar and Euro facing a decline in demand, the rise of the Chinese yuan as a preferred currency could alter the balance of economic power on a global scale.
Only time will tell if this trend will persist and what the long-term consequences might be for Russia and the world.