In a move that may influence the Russian ruble, the country’s Finance Ministry has announced plans to significantly increase its foreign currency purchases in October. The ministry intends to buy 279.4 billion rubles (around US$3.3 billion) worth of foreign currency from October 7 to November 6, under Russia’s fiscal rule framework. This marks a substantial rise from the previous net daily purchase level of 1.9 billion rubles to an expected 12.1 billion rubles per day, after considering the central bank’s currency sales.
The increase in foreign currency purchases comes amid a backdrop of rising oil prices, which have climbed to an average of US$92.10 per barrel in September, up from US$67.10 in August. Analysts anticipate that these higher oil prices will bolster government energy tax revenues, projecting oil and gas income to surpass the fiscal rule’s baseline by nearly 290 billion rubles. This could help mitigate the potential pressure on the ruble from increased government purchases.
However, the situation remains complex as analysts have raised concerns about potential fluctuations in the exchange rate due to the timing of government purchases, export revenues, and tax payments. While there is a possibility that the ruble could weaken against the US dollar due to the heightened currency purchases, several analysts believe that a sharp decline is unlikely. This is because energy exporters, benefiting from higher oil prices, may sell more of their foreign currency earnings to meet tax obligations, thereby providing support for the ruble.
The ultimate performance of the ruble in the near term will largely hinge on the interplay between the Russian government’s demand for foreign currency and the supply generated by oil exports and corporate tax payments. As such, the balance of these factors will be crucial in determining the ruble’s stability in the coming weeks.