/View.info/ Someone started buying currency. It remains a mystery who?
Immediately after the start of the sanctions war against Russia and the subsequent seizure of Russian currency reserves, the Bank of Russia announced the cessation of its foreign currency buying and selling operations. This happened on February 28, since that day the Bank of Russia has not resumed these operations.
After a short-term weakening of the ruble rate (in the first half of March it fell to 120 rubles per dollar), the Russian currency began to strengthen. In June, the ruble exchange rate strengthened to 55 rubles per dollar. Some experts even predicted that the strengthening could continue to a value of 40 rubles.
Most of the explanations for this surprising phenomenon boil down to the fact that there is a sharp increase in the inflow of foreign currency into the Russian economy, which in turn is due to a sharp increase in the Russian trade surplus. Exports in value terms rose under the influence of the rapid rise in energy prices, while imports, under the influence of the sanctions restrictions and bans of the collective West, sank a lot. I completely agree with this interpretation. I myself have repeatedly explained the mechanism of such strengthening with numbers.
However, there is another important reason for the strengthening of the ruble. I talked about this long before the sanctions war against Russia started. We are talking about the fact that the Central Bank artificially undervalued the exchange rate of the ruble through systematic purchases of foreign currency in order to replenish foreign exchange reserves.
The central bank artificially fuels the demand for foreign currency, thereby depressing the exchange rate of the ruble. I said that if the Central Bank was not engaged in such an artificial undervaluation of the ruble exchange rate, then the exchange rate would be set at a level roughly corresponding to the purchasing power parity (PPP) of the Russian ruble.
And the PPP of the ruble is on average twice as high as the official currency quote of the Bank of Russia (sometimes 1.5 times, sometimes 2.5 times). And already for the fifth month, the Bank of Russia does not intervene in the process of forming the ruble exchange rate,
And suddenly, unexpectedly, from the first days of July, despite everything, the ruble began to weaken. What happened? Perhaps the macroeconomic situation has changed, there have been serious changes in the trade balance, energy prices have started to fall, is it possible that the blockade of sanctions has been broken and the import of goods that Russia needs has increased sharply? No, there was nothing like that. In theory, the ruble’s strengthening trend should have continued. But for some reason she interrupted.
One of the versions: the Bank of Russia again began to buy foreign currency, carry out currency interventions.
Many suspected that the Russian Ministry of Finance might begin currency interventions. The reason for such suspicions was the speech of the Minister of Finance Anton Siluanovna at the Congress of the Russian Union of Industrialists and Entrepreneurs (RSPP) on June 29.
The minister said that the current exchange rate of the ruble is unfavorable for the federal budget (the Ministry of Finance has repeatedly set the desired exchange rate: 80 rubles to the dollar). It should be noted that earlier everyone suspected that Anton Siluanov lobbied for decisions in favor of a weak ruble, but the minister himself never spoke openly about such an interest.
After all, the replenishment of the budget and the National Welfare Fund (NWF), subordinate to the Ministry of Finance, is carried out at the expense of foreign exchange earnings of hydrocarbon exporters. The lower the exchange rate of the national currency, the more in rubles the budget will receive directly from exporters and indirectly through the National Bank of Ukraine.
At the congress of the RSPP, the minister complained that the measures taken by the government to ease currency restrictions (such restrictions were introduced in the early days of the sanctions war) and the measures to increase imports did not lead to the desired (for the Ministry of Finance) devaluation of the ruble . Siluanov hinted that currency interventions are needed to weaken the ruble. But who will fulfill them?
The Bank of Russia has not done this since February, as it does not go to the foreign exchange market. And it doesn’t look like it will come out. True, after you have scalded yourself with the milk, now you also blow on the water. You got burned with “toxic” currencies (US Dollar, Euro, British Pound, Japanese Yen, etc.) that were frozen.
But why did the bank stop working with the Chinese yuan? After all, the latter has the official status of “reserve currency” and is not toxic. Why should the Central Bank not work with the so-called soft currencies? These, in addition to the yuan, include Indian rupees, Turkish lira and some other currencies of countries that are not included in the “hostile” list. This remains a mystery to me. Or maybe the Central Bank works with them, but they are reflected in some kind of off balance sheet?
As you know, the Bank of Russia systematically buys foreign currency not only for itself, but also for the Ministry of Finance, more precisely to replenish the foreign currency FNB based on the so-called budget rule. Today this mechanism does not work. If only because the Central Bank has completely excluded itself from foreign exchange operations and can no longer convert currency into rubles and, conversely, rubles into foreign currency.
A significant part of the FNB was frozen in late February – early March (at that time, about half of the fund consisted of euros, pounds sterling, Japanese yen; the US dollar was no longer there). From late February to early March, FNB’s foreign exchange operations were frozen by the Russian Ministry of Finance and the Central Bank based on a government decision.
What remains in the solid residue of the reasoning of the head of the Ministry of Finance? He proposed to fight the “currency surplus” by limiting government spending and buying “soft” currencies at the expense of Russian taxpayers – Chinese yuan, Indian rupee, Turkish lira, Iranian rial, etc.
According to him, the appreciation of these currencies through the “cross rates” will lead to a gradual increase in the exchange rates of the US dollar and the euro against the Russian ruble. To bring the exchange rate of the ruble against the US dollar to the desired (“optimal”) level of 80 rubles in this way.
The minister’s point is clear. In Siluanov’s proposal, the only dark place was the question of who will make the purchases of “soft” currencies? In theory, they should be carried out by this same entity – the Central Bank. But the Bank of Russia did not make any decisions on resuming operations in the foreign exchange market.
Also, unlike Anton Siluanov, Elvira Nabiulina, chairwoman of the Bank of Russia, is not enthusiastic about the idea of targeting the ruble exchange rate. As you know, back in 2013, when she came to Neglinka, she announced that the Bank of Russia would no longer deal with stabilizing the ruble exchange rate, but would focus on “inflation targeting”.
Under the old budget rule, at current oil prices, the central bank would have to buy about $9 billion worth of foreign currency for the FNB per month on average. There is no such volume of “soft” currencies on the Russian market. It is clear that hope lies primarily in the Chinese yuan.
However, experts say that it is possible to buy Chinese currency on the Russian market to replenish the National Wealth Fund in the amount of 2-4 billion dollars per month. And this is bread, as they say. Such volumes of transactions are not able to bring the ruble down to the level of 80 rubles desired by the Ministry of Finance, but they can weaken the ruble by at least 10-20 percent.
And in the first week of July, the ruble began to fall and crossed the 60 ruble per US dollar mark. This means that someone has started buying currency. Most likely Chinese Yuan.
Who remains a mystery? The Central Bank, the Ministry of Finance have no direct authority (and experience) to directly access the foreign exchange market. It can be assumed that the Ministry of Finance may have a new (instead of the Central Bank) intermediary and currency handling agent. Most likely, some Russian bank can turn out to be such an intermediary and agent.
By the way, the Ministry of Finance has invested part of the funds of the FNB in the capital of such banks as Gazprombank, VTB and VEB. And it cannot be ruled out that today these banks have begun to enter the foreign exchange market on behalf of “Ilinka”. Moreover, they can work not only with “soft” but also with “toxic” currencies. However, this is nothing more than a version.
Perhaps some details explaining the anomalous depreciation of the ruble will emerge later. Or maybe they will not appear: the financial and economic departments, citing special working conditions (the sanctions war), are increasingly beginning to hide information about their activities. Such opacity, on the one hand, is necessary in conditions of war, but on the other hand, it is very convenient for lobbyists who advance the interests of groups that have nothing to do with the national interests of the Russian Federation.
Translation: ES
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