In a move aimed at shoring up the ruble, the Russian central bank has declared a halt to its acquisition of foreign currency within the domestic market, effective from Thursday. This strategic decision comes as the ruble experienced its most subdued position against the dollar since March 2022.
Providing insight into their rationale, the central bank disclosed its intention in a late Wednesday statement, outlining that "The Bank of Russia has determined that, commencing August 10 until December 31, 2023, it shall abstain from the procurement of foreign currency in the domestic market."
At the core of this maneuver lies the objective of mitigating volatility within financial markets, an ambition underscored by the central bank itself. This approach signifies a temporary departure from their customary budget guideline, a framework entailing Russia's acquisition or liquidation of foreign currency reserves housed within its National Wealth Fund. These reserves have traditionally functioned as a counterbalance to the oscillations in earnings stemming from oil and natural gas exports.
The impetus for this course of action stems from the recent substantial devaluation of the ruble, which provoked apprehensions among the Russian populace regarding potential erosion of their living standards.
At present, the ruble's valuation stands at 107 against the euro and 97 against the dollar, representing its most depressed values since the initial phases of Moscow's military intervention in Ukraine.
It's worth noting that the central bank had recommenced foreign exchange acquisitions in accordance with the budgetary guideline in January. This resumption had followed a hiatus of nearly a decade, a hiatus that corresponded with Russia weathering a barrage of punitive measures from Western powers in response to the Ukrainian conflict.
Before the commencement of the offensive operations in February 2022, Russia had predominantly relied on euros and dollars for the purpose of harmonizing its fiscal standing. In a bid to curtail the leverage held by Washington, Moscow has consciously moved towards diminishing its dependency on the dollar. As a result, when resuming foreign exchange acquisitions earlier this year, the focus pivoted towards the Chinese yuan.
While outlining their present stance, the central bank articulated, "The Bank of Russia will gauge the tangible conditions within financial markets before arriving at a verdict regarding the resumption of foreign currency procurements based on fiscal guidelines within the domestic market."
