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Peter Davis

An writer at FOMOdrive

  • Sep 07, 2023
  • 2 min read

The Bank of Russia will increase foreign currency sales ninefold

On Wednesday, the dollar exchange rate renewed its three-week high, surpassing 98 rubles per dollar.

After the Bank of Russia made an announcement, the Russian currency regained some of its losses.

The Central Bank will increase foreign currency sales by a factor of more than 9 over the course of a week and a half.

The daily volume of transactions is expected to increase to 21.4 billion rubles, up from the previous 2.3 billion.

Eurobonds must be repaid in currency.

On Wednesday, the Bank of Russia declared that it would be selling foreign currency worth 150 billion rubles (equivalent to approximately $1.5 billion) between September 14 and 22. This is a significant increase from the 2.3 billion rubles that were initially planned, with daily sales (including weekends) now amounting to 21.4 billion rubles, as reported by RBC.

The Central Bank attributed the increase in sales to the need to settle the Eurobond currency issue on September 16th. This is intended to reduce volatility in the foreign exchange market and prevent a sharp depreciation of the ruble.

Upon repayment, Eurobond holders, as per the established protocol, will receive payments from the Ministry of Finance in Russian rubles. Some of them may then choose to purchase foreign currency.

It is unknown what portion of the $3 billion issue placed in 2013 was allocated to "unfriendly" foreigners.

The Central Bank has stated that over the next two years, there will not be any large payments on the Russian Federation's Eurobonds in a similar amount to the one being paid off this year. The next redemption date for the €1.75 billion currency issue is set for December 4, 2025.

Promsvyazbank suggests that the expansion of the supply of currency is enough to disrupt the trend of a "creeping" weakening of the ruble. Even though this measure is localized, expectations of an increase in foreign currency sales will likely cause the dollar to return to the area of 97 rubles.

It is expected by banki.ru that the ruble may be supported by the results of the Central Bank of the Russian Federation's meeting, which is scheduled for Friday, September 15th, next week.

Anatoly Aksakov, the head of the State Duma Financial Market Committee, cautioned that the Central Bank may raise the key rate again if the dollar nears the 100 ruble mark the day prior.

Sovcombank believes that the increase in currency sales will not have a major impact on the ruble's strength, but rather help to reduce the potential weakening caused by the redemption of bonds.

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