The Bank of Russia made an announcement on Wednesday stating that it will increase its planned sale of foreign currency on the domestic market to 150 billion rubles ($1.5 billion) in order to repay government-issued Eurobonds. This decision comes as a response to the need to address the $3 billion Eurobond payment due on September 16.
To handle this situation, the central bank will significantly increase its daily “mirroring operations” by selling $218 million worth of foreign currency each day from September 14 to 22. This tenfold increase in sales is said to be connected to investments from the government’s wealth fund.
By redistributing foreign currency sales through mirroring transactions, the Bank of Russia aims to meet any potential additional demand for foreign currency during this period and minimize volatility in the foreign-exchange market. By doing so, they hope to stabilize the market and prevent any potential slide in the value of the ruble.
The announcement of the central bank’s decision had an immediate impact on the Russian currency. The ruble strengthened to 97.59 against the US dollar and 104.81 versus the euro. Market players deemed this move as positive for the ruble, as it could prevent the currency from weakening during the Eurobond repayment.
Vasily Karpunin, the head of the Information and Analytical Content Department at BCS World of Investments, commented on the central bank’s actions. He stated that the sale of the previously planned volume of foreign currency ahead of schedule could prevent any potential depreciation of the ruble. Karpunin explained that the currency would have been sold eventually, but by doing it earlier, over a shorter period, the central bank can control and mitigate any negative impact on the currency exchange rate.
It is worth noting that the Russian ruble has been declining against the US dollar since early June when it was trading at around 80-81 to the greenback. This increase in foreign currency sales is seen as a proactive measure by the central bank to maintain stability in the foreign-exchange market and limit any further depreciation of the ruble.
Overall, the central bank’s decision to increase the sale of foreign currency on the domestic market is a strategic move to address the upcoming Eurobond payment. By doing so, it aims to meet potential additional demand for foreign currency and minimize any adverse effects on the stability of the ruble. Market players believe that this move will positively impact the ruble and prevent any significant currency depreciation.