Russia’s Ministry of Finance has nearly tripled its yuan sales under the budget rule for the period from February 7 to March 6, a development reported by online departments. The Bank of Russia has continued selling foreign currency on the domestic market via the National Wealth Fund, but now focuses exclusively on yuan trading after a ten month pause. Transactions occur on the Moscow Stock Exchange.
To avoid a sharp impact on the ruble, the yuan is being sold in installments of 3.2 billion rubles per trading day. The Ministry of Finance stated that the proceeds will be directed to the budget to cushion lost revenues from sanctions.
In January the federal budget faced a loss of oil and gas revenues amounting to 54.5 billion rubles. The current plan allocates a total of 160.2 billion rubles for foreign currency sales, with an additional 52.1 billion rubles added for January and a projection of 108 billion rubles for February due to export duties on gas tied to a smaller volume. The February loss estimate and the overall revenue impact are noted in the ministry’s statement which indicates that trading will run from February 7, 2023 to March 6, 2023 with a daily foreign exchange sale volume of 8.9 billion rubles.
January saw oil and gas revenues reach 425.5 billion rubles, below levels seen in January 2021 and January 2022. The budget for the year assumes Urals oil at 70 dollars per barrel. If prices run significantly lower, the deficit in budget revenues could reach as much as 250 billion rubles per month. The reported official average price of Urals in January was 49.5 dollars per barrel.
Impact on the Ruble
Evgeny Egorov, president of the Association of Financial Market Experts ACI Russia, believes the yuan sales will not greatly affect the ruble’s exchange rate. He notes that the impact is limited because the volume is small relative to the entire foreign exchange market, both on and off the spot market. He also mentions that a much larger volume would be needed to move the rate substantially.
Natalia Orlova, chief economist at Alfa-Bank, suggests that about six billion dollars in transactions could have a noticeable effect on the rate. Sergei Konygin, chief economist at Sinara Investment Bank, agrees that such operations could halt a decline in the ruble but are unlikely to strengthen it. He points out that capital movements driven by dividends, OFZ sales by non-residents, and domestic fund withdrawals have a greater influence on the currency.
Ksenia Yudaeva, first deputy governor of the Central Bank, notes that the impact of yuan trading on the yuan-ruble rate is not straightforward. She explains that cross-rate movements on the Russian stock market may diverge from the world rate, and the yuan’s rate against the euro may differ as well. In practice, she says, such deviations are usually small, though not impossible.
On February 3, the yuan retraced after reaching a three-week high against the US dollar as the greenback strengthened. The dollar/yuan rate in the continental market opened around 6.74. The prior day, the People’s Bank of China set the midpoint at 6.738 versus 6.713 previously, signaling cautious positioning by the central bank.
These developments reflect ongoing shifts in Russia’s currency strategy amid sanctions and evolving energy revenue dynamics. Market participants continue to monitor policy actions, cross-border flows, and external price signals for clues about the ruble trajectory and overall financial stability in the region.