The ruble rose to a maximum in 2 weeks after the decision of the Central Bank to sell yuan from reserves

The ruble rose in price on the Moscow Exchange on Wednesday for the third day in a row.

After the authorities announced that they would start selling currency on the stock exchange from the National Wealth Fund for the first time in two years, the dollar fell to a two-week low and the euro to its lowest level since the first day of trading this year.

The exchange rate of the American currency fell to 68.27 rubles, and at 17:53 Moscow time it is at around 68.62 rubles (-1.7%). The euro is depreciating by 1.6% to 73.74 rubles, and earlier it fell to 73.55 rubles.

The main news for the foreign exchange market was the decision of the Central Bank and the Ministry of Finance to resume interventions on the stock exchange, says Vladislav Silaev, senior trader at Alfa Capital. From January 13, the Central Bank will sell Chinese yuan from the NWF on the stock exchange for 3.2 billion rubles a day.

Both the market and the budget need the last foreign exchange reserves of the state, which were not subject to Western sanctions: due to the oil price ceiling, Russia loses $170 million a day (according to CREA estimates), and government revenues from oil rent collapsed by 33% in December year by year.

In total, 54.5 billion rubles worth of yuan will be sold by February 6. This is about 5-10% of the daily turnover in Chinese currency trading, so the direct effect on the ruble will be small, PSB analysts write.

If the volumes continue, these interventions can strengthen the ruble by 1.5 rubles against the dollar, estimates Dmitry Polevoy, Investment Director of IC Loko-Invest. However, the effect on the dollar and euro rates from the sale of yuan will depend on the banks – how much they can level the arbitrage through cross-rates, he emphasizes: the market will “digest” the current volumes without problems, but if they grow, problems are possible.

The effect on the ruble will accumulate, the PSB notes. In total, the Ministry of Finance has access to 310 billion yuan for 3.2 trillion rubles.

Central bank interventions on their own “will not lead to a significant strengthening of the ruble,” says Mikhail Shulgin, head of global research at Otkritie Investments. The fact is that the currency from the reserves only compensates for the reduction in foreign exchange earnings from oil exports, he explains: in December, after the introduction of the EU embargo and the price ceiling, Russia lost 20% of demand for its barrels, and the average price of Urals fell to $50.

At current oil prices and exchange rates, the Ministry of Finance will continue to sell foreign currency in the coming months, and the dollar may drop to 66-68 rubles, says Polevoy.

As for the loss of oil revenues, they are partially offset by a reduction in imports, as well as demand for currency from the population and companies, he points out.


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