The Central Bank of Russia and the Ministry of Finance will resume foreign exchange transactions in the domestic market from January 13. We’re talking about buying and selling yuan under the fiscal rule, reported editor’s press service.
The message reads, “On the currency section of the Moscow Stock Exchange, the Chinese yuan-ruble instrument will be traded tomorrow with settlement futures (CNYRUB_TOM)”.
In order to minimize the impact of foreign exchange interventions on the ruble and yuan rate, the Central Bank will trade it equally throughout each trading day.
The resumption of foreign exchange trading under the fiscal rule means that the regulator buys yuan when oil and gas revenues are high and sells when they are low. Unlike similar intervention mechanisms implemented by the Central Bank until February last year, operations will now be conducted in Chinese currency, not the “toxic” dollar and euro.
The regulator noted that the Central Bank of Russia also retains the authority to conduct operations in the foreign exchange market in order to maintain financial stability.
In January, the state will sell the yuan, as announced by the Ministry of Finance: predictions departments, Russia in January will receive 54.5 billion rubles less oil and gas revenue. The Central Bank has to sell the yuan for this amount.
“The operations will be carried out from January 13 to February 6, 2023, respectively, the daily volume of foreign currency sales will amount to 3.2 billion rubles. Due to the risks of reduction in the amount of gas exports realized compared to the estimated values, the amount of income to be obtained from the export tax on gas may be less and this will be taken into account in the regulation to be made in the coming months,” the ministry explained.
The Ministry of Finance will evaluate on a monthly basis how much oil and gas revenue will go to the treasury in the current month. For this, several parameters will be used, including actual offers for Ural oil, rubles against the dollar, export prices for natural gas and projected oil and gas production volumes.
“In case the projected oil and gas revenues exceed the monthly base level, the Russian Ministry of Finance will carry out operations to purchase liquid assets in the amount of additional oil and gas revenues. In the event that in the current month the federal budget is expected to lose in oil and gas revenues, the Russian Ministry of Finance will carry out operations to sell the corresponding volume of liquid assets.” announced in the department’s press office.
After the messages of the Central Bank and the Ministry of Finance on the use of foreign exchange interventions, the dollar rate began to decline against the ruble in the Moscow Stock Exchange. At 13:50 Moscow time, it fell 87 kopecks to 68.92 rubles. Thus, for the first time in 2023, the dollar is traded at less than 69 rubles.
After the start of a special military operation in Ukraine and the subsequent anti-Russian sanctions, the ruble exchange rate for the first time weakened sharply: in March 2022, the dollar was traded at 120 rubles, and the euro at 132 rubles. Then the national currency began to strengthen gradually. And until the end of autumn, the dollar and euro traded in the range of 55-60 rubles. At the same time, the Central Bank canceled foreign exchange transactions in the domestic market according to the budget rule on January 24, 2022, one month before the start of the CBO.
Such over-strengthening of the ruble was unprofitable for the exporting companies as well as for the budget. In the summer, Deputy Prime Minister Andrei Belousov described the exchange rate of 70-80 rubles per dollar as the most comfortable for the Russian industry.
Finance Minister Anton Siluanov allowed foreign exchange interventions to stabilize the exchange rate, but noted that it was risky for Russia to trade in euros and dollars due to sanctions. For this reason, interventions in the currency of friendly countries were allowed.
“Now the currency is toxic, but we are ready to influence the course. [инвестировать] in the currency of friendly countries. It will be possible to regulate the value of the dollar and the euro against the ruble, through the currency of friendly countries, through cross rates with the dollar and the euro,” Siluanov said.