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An injection into the yen: why does the Moscow Exchange stop trading in the Japanese currency | Articles

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From August 8, the Moscow Exchange suspends trading in the Japanese yen on the foreign exchange market. The decision was made due to potential risks and difficulties in making settlements due to sanctions. Traders and analysts told Izvestia what effect the restrictions on yen trading would have and why Japan acted recklessly by imposing a ban on Russian gold imports.

Put on pause

According to the Moscow Exchange, the restrictions will affect spot and swap instruments on the Japanese yen-Russian ruble (JPY/RUB) and US dollar-Japanese yen (USD/JPY) currency pairs in exchange and over-the-counter modes. Also, the yen will not be accepted as collateral for transactions on the markets of the Moscow Exchange. The fulfillment of obligations under transactions concluded before August 5 will be carried out as usual.

Photo: Izvestia/Alexander Kazakov

The Japanese yen is not the most popular currency instrument among Russians. On the exchange, work with it is mostly carried out through the USD/JPY settlement futures. In terms of turnover on the Moscow Exchange, this currency is far from being the leader.

— In 2021, the monthly trading volume in the yen-ruble pair with “tomorrow” settlements only in June exceeded 160 million rubles. For comparison, the minimum volume in the Swiss franc-ruble pair with “tomorrow” settlements in 2021 did not fall below 1.3 billion rubles per month,” notes KSP Capital analyst Mikhail Bespalov.

Speculative interest

Wherein In the spring, the volume of yen trading on the Moscow Exchange increased markedly. Experts associated speculative interest in the currency with the introduction of commissions on balances in US dollars and euros. However, Russia has taken a course to reduce the number of financial instruments used by unfriendly countries, including currencies.

The first was the Swiss franc – since June 14, the Moscow Exchange has suspended trading in this currency. The measure was explained by the difficulties in making settlements in francs that bidders and the financial infrastructure faced. This happened after Switzerland introduced restrictive measures against the Russian economy. A similar decision was made for the yen.

Since an increase in balances in any unfriendly currency carries the risk of blocking, the Moscow Exchange decided to quickly close trading in Japanese currency – until customers bought a lot into their accounts. In July, the yen turnover exceeded 100 million rubles a day,” explains Victor Tunev, chief analyst at Ingosstrakh Investments Management Company.

Dead weight

Nevertheless, trading volumes were scanty. Yes, in June the volume of daily transactions in yuan amounted to 52 billion rubles, and the yen barely gained 210 million. One of the reasons for the suspension of trading in the yen was the fall in trade between Russia and Japan due to sanctions.

Photo: Izvestia/Alexey Maishev

– There was little need to provide export-import operations in yen, and after the appearance of Japanese sanctions, they completely disappeared. Japan pays energy contracts with US dollars. Accordingly, there are risks that the yen on the accounts of individuals or organizations will turn out to be a dead weight with an unclear assessment of the value, – Andrey Kochetkov, a leading analyst at the Otkritie Investments market analysis department, points out.

The actions of the Central Bank of the Russian Federation in relation to the yen are quite justified and reasonable. The regulator wants to protect individuals and organizations from the unpredictable value of the currency itself and transactions with it, the analyst adds.

Not friendly

Japan has imposed several packages of sanctions against Russia. The sanctions lists included 507 people from the Russian Federation, 253 from the LPR and the DPR. Also, restrictions are imposed on more than 200 Russian companies, including banks. In addition, Tokyo has imposed a ban on the import of Russian gold, which will come into force on August 1. All this clearly does not add to the attractiveness of the Japanese currency on the Russian market.

Photo: REUTERS

– Japan’s initiatives to ban gold imports or other sanctions restrictions are an attempt to sing in the G7 choir without taking into account their own interests. In fact, the yen ceases to be a reserve currency for the Russian Federation and may become a candidate for a full flight into the composition of the third exotic echelon currencies. Whereas gold is an anonymous form of money that does not require bank confirmation when physically moving. Ingots remain themselves in Africa, Latin America and even on Easter Island— says Kochetkov.

Focus on the yuan

Thus, the suspension of yen trading affects trade relations with Japan: it becomes very difficult to make mutual settlements with Japanese companies. Experts believe that the Chinese yuan will become an additional beneficiary in this case, since most trading is shifting its focus to this currency.

Photo: TASS/Zuma

– Maintaining demand for the yuan through cross-rates should push the dollar to strengthen somewhat and thereby help the Russian Ministry of Finance, which is in favor of strengthening the dollar and the euro to fulfill the budget. Today, the Russian Federation is in the stage of a strong market reorientation, and this will change the current order of things. Rejection of free circulation of currencies of unfriendly countries, including the yen, will further reduce the dependence of the Russian economy on the economies of unfriendly countries— concluded Igor Butakov, financial director of CPC “Capital of Regions”.

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