Russian Central Bank Stopped Buying Foreign Currency

The Bank of Russia announced the suspension of currency purchases on the market as part of the budget rule in order to “reduce the volatility of financial markets.” 

The decision to stop purchases was made after a sharp decline in the ruble exchange rate. During the auction on January 24, the dollar value exceeded 79 rubles for the first time since November 2020, and the euro exchange rate exceeded 89 rubles for the first time since July 2021.

“The Bank of Russia monitors the situation on the financial market and has enough tools to prevent threats to financial stability,” the Central Bank stated.

The press service of the bank noted that the decision to resume purchases of currency on the market will be made “taking into account the actual situation in the financial markets.”

After the measure was taken by the Central Bank, the ruble regained some of the losses incurred during the day. By 4.45 pm Moscow time, the dollar exchange rate was 77.36 rubles and the euro exchange rate was 87.59 rubles.

Picture: Screenshot from the Russian Central Bank Official Website

As reminded, before the Central Bank’s decision was made today, the Director of the Financial Markets Operations Department at Russian Standard Bank, Maxim Tymoshenko, warned that record daily currency purchases under the budget rule play against the ruble. Starting from January 18, the Central Bank has been buying currency on the market for the Ministry of Finance according to the budget rule for 36.5-36.9 billion rubles daily.

However, according to experts, this week will be the peak of the tax period, by which Russian exporters consolidate ruble liquidity, which will provide some support to the ruble. In particular, VAT, mineral extraction tax, and excise taxes will be paid on Tuesday, January 25. In addition, large exporters will sell foreign currency to pay taxes in rubles and this will also support the ruble exchange rate.

Ru-Main, 24.01.2022
Source: RBC 

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