From January 13, the Bank of Russia will once again return to foreign exchange interventions, that is, buying or selling foreign currency in the domestic market, something it has not done since spring 2022, when the dollar rose well above 100 rubles.<\/p>\n\n\n\n
Another important difference, which is historical: for the first time, the Central Bank of Russia intervenes not with the dollar, but with the yuan.<\/p>\n\n\n\n
Russia refuses to hold its NWF reserves in Western currencies and switches to yuan and gold. This decision was made at the end of the year. It makes sense that the Central Bank also keeps its reserves in yuan and not in dollars and euros.<\/p>\n\n\n\n
After locking up half of the gold and foreign exchange reserves, it became dangerous for the NWF to buy foreign currency in unfriendly countries. Almost all world reserve currencies, except the yuan, became toxic to Russia because the central banks of unfriendly countries could generally prohibit the Central Bank of the Russian Federation from any foreign exchange transactions.<\/p>\n\n\n\n
In general, Russia has few options, since the only reserve currency belonging to a friendly country is the yuan. In addition, the yuan is now the main currency for Russia’s NWF and gold reserves. The liquidity of the yuan on the Moscow Stock Exchange has reached a high level and is already comparable to the dollar.<\/p>\n\n\n\n
The new budget rule has been in effect since the beginning of 2023. According to it, surplus profits from oil and natural gas go to the National Welfare Fund. However, the finance ministry expects no surplus in January because exports fell in December due to new EU sanctions \u2013 an oil embargo and an oil price cap.<\/p>\n\n\n\n
Therefore, the budget rule begins to work in the opposite direction: the state will not sell the ruble, exchanging it for foreign currencies, but, on the contrary, will sell the currency (yuan) and buy rubles.<\/p>\n\n\n\n
That is, at the moment there is nothing to replenish the NWF, and the ruble, which has fallen in value in December, needs to be supported.<\/p>\n\n\n\n
The Ministry of Finance estimated that the budget will receive less revenue from oil and natural gas in January amounting to 54.5 billion rubles. This means that from January 13 to February 6, the Central Bank will sell 3.2 billion rubles of yuan every day. Curiously, it was not the yuan that reacted to the Treasury statement, but the dollar, which fell 2%.<\/p>\n\n\n\n
The resumption of fiscal rule will help reduce the volatility of the ruble exchange rate as a new major player emerges in the market to smooth out the export-import imbalance.<\/p>\n\n\n\n
The decline in oil prices in December to an average of $50.50 per barrel reduces the flow of oil and gas budget revenues in early 2023.<\/p>\n\n\n\n
The Central Bank of the Russian Federation, by selling yuan, will provide the Ministry of Finance with rubles for the amount of the backlog in oil and gas revenues. Should the budget revenue fall further, yuan sales will rise to support it.<\/p>\n\n\n\n
This will be beneficial to the population and businesses that operate mainly in the domestic market or have no export revenue. Exporters will not benefit from a stronger ruble, however, as Russia restores oil and gas export revenues, the budget rule will return to business as usual and yuan purchases in the NWF will continue.<\/p>\n","protected":false},"excerpt":{"rendered":"
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