Russian president's latest initiative

On Friday President Putin again called for greater use of sub-national currencies in mutual settlements in CIS countries. By sub-national, he really means either to increase RUB usage or at least to use the USD less as a trade currency. 

There's nothing really new about the authorities of emerging market countries wanting to increase usage of their currencies for trade purposes. The question is whether it is realistic. For multinational companies both in emerging markets and in developed markets it continues to make more sense to use the USD as a trade currency, says Commerzbank. Transaction costs are low, payment systems are efficient and most importantly there is trust in the value of the USD. 

The same cannot be said for the RUB, as events earlier this year clearly showed. More to the point, one central bank battles with inflation which is too high, the other with inflation which is too low. Against the background that high inflation tends to be more volatile, it is easy to figure out which currency trade partners prefer.