The Central Bank of Russia and the Ministry of Finance plan to restart foreign exchange dealings in the domestic market starting January 13, focusing on yuan trading under the fiscal rule. This entails the Bank and ministry handling yuan purchases and sales within the regular daily rhythm of trading, rather than through volatile, ad hoc moves.
Officially, the currency section of the Moscow Stock Exchange will list the yuan-ruble instrument for tomorrow’s settlements as a futures product (CNYRUB_TOM). The approach is designed to distribute interventions evenly across each trading day, helping to cushion the ruble and yuan from abrupt fluctuations.
Resuming foreign exchange operations under the fiscal rule means the regulator will buy yuan when oil and gas revenues are strong and sell yuan when those revenues are weak. Previously, similar interventions were implemented with different mechanics, and the current framework emphasizes using the Chinese currency instead of relying on dollars and euros, which have been described as high-risk in recent times.
The regulator also affirmed that the Central Bank retains the authority to conduct market operations to preserve financial stability whenever necessary.
In January, the Ministry of Finance announced that the state would be selling yuan. It is projected that Russia will receive 54.5 billion rubles less in oil and gas revenue, and the Central Bank is expected to offset this by selling yuan to align with budgetary needs.
From January 13 to February 6, 2023, the daily volume of foreign currency sales is planned at 3.2 billion rubles. Given potential shifts in gas export volumes, the revenue from export taxes on gas might be lower than anticipated, and this possibility will be reflected in forthcoming regulatory actions.
The Ministry of Finance will assess, on a monthly basis, how oil and gas revenue routes into the treasury for the current month. To form its view, it will consider multiple parameters, including actual offers for Ural oil, rubles in relation to the dollar, export prices for natural gas, and projected production volumes for oil and gas.
If projected oil and gas revenues exceed the monthly baseline, the Ministry will undertake measures to acquire liquid assets equal to the additional revenue. If the current month forecasts show a potential loss from oil and gas, the Ministry will implement operations to sell corresponding liquid assets to balance the budget.
Following announcements from the Central Bank and the Ministry of Finance about the use of currency interventions, the dollar strengthened against the ruble earlier in the day on the Moscow Exchange, before retreating. By 13:50 Moscow time, the dollar had declined by about 87 kopecks to around 68.92 rubles, marking a rare instance in which the dollar traded below 69 rubles for the first time in 2023.
Since the onset of the special military operation in Ukraine and the accompanying sanctions, the ruble experienced a sharp initial weakening. In March 2022, the dollar traded near 120 rubles and the euro around 132 rubles. The ruble subsequently began a gradual recovery, stabilizing in the 55–60 ruble range by late autumn. The budget rule had suspended foreign exchange transactions in the domestic market in January 2022, just ahead of the CBO period that followed a month later.
In the past, a very strong ruble proved challenging for exporters and for fiscal planning. A consensus in government circles has been that a more moderate rate would be most comfortable for the domestic industrial sector, with some officials noting that a balance around 70–80 rubles per dollar could support production and budgets alike.
Finance officials have signaled that currency interventions should stabilize the exchange rate but acknowledged the risk of relying on euros and dollars due to sanctions. The strategy now includes the possibility of using the currencies of friendly nations for stabilization, with cross rates against the dollar and euro offering a way to calibrate the ruble’s value without increasing exposure to sanctions.
Overall, the exchange regime moves aim to maintain financial stability while preserving flexibility in the face of external pressures. The authorities emphasize that they will act to smooth volatility and safeguard the treasury, leveraging the yuan and, when necessary, other currencies in a measured, rule-based manner.