China Russia Squeezing Out Dollar

Dollar stability took another slight hit yesterday as it was reported by Bloomberg.com that China and Russia will begin trading the yuan and ruble directly. To date conversion into US dollars has been a required step in the process. Now, as these producing nations move toward greater efficiency in direct trades, the dollar will lose another position of significance.

You can learn more about the planned transition by reading the article at Bloomberg.com. Here’s a sample…

Yuan Trading Against Russian Ruble Said to Start Within Weeks in Shanghai

China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar’s role in global trade.

China may start trading its currency against the ruble within weeks, three bankers with knowledge of the matter told Bloomberg, and sent out a document last week allowing lenders to apply for ruble trading licenses, one of them said. Russia’s Micex Stock Exchange is making preparations to trade the ruble against the yuan in an initiative that has the backing of the country’s central bank, Ruben Aganbegyan, the head of the bourse, told reporters at a conference in Moscow today.

“Given the risk to the dollar and U.S. assets from their fiscal position they want to reduce their dependence on the dollar as an invoicing currency,” Bhanu Baweja, global head of emerging markets fixed income, currency and credit research at UBS AG, said in a phone interview from London. “It makes sense for two large economies to exclude a third, overly dominant economy from their trading equation.”