Russia’s Finance Ministry is set to escalate its foreign currency purchases significantly in October, a move that could exert additional pressure on the ruble. This strategy involves increasing daily purchases more than sixfold, with the ministry planning to acquire 279.4 billion rubles (around US$3.3 billion) in foreign currency from October 7 to November 6, following the guidelines of the country’s fiscal rule.
Analysts, however, suggest that the potential depreciation of the ruble might be mitigated by a rise in oil revenues and increased currency sales by exporters. The net daily purchases are expected to reach 12.1 billion rubles, up from a previous level of 1.9 billion rubles, after considering the central bank’s currency sales.
This adjustment comes on the heels of rising oil prices, which averaged US$92.10 per barrel in September compared to US$67.10 in August. The increase in oil prices is anticipated to augment government energy tax revenues, with oil and gas income likely to surpass the fiscal rule’s baseline by nearly 290 billion rubles.
While the government’s increased purchases might weaken the ruble, the higher oil prices could also lead to additional foreign currency earnings for energy exporters. These companies may sell more of their earnings to meet tax obligations, potentially offering support for the Russian currency.
Experts caution that the timing of government purchases, export revenues, and tax payments could lead to fluctuations in the exchange rate. Although some projections indicate that the increased purchases might weaken the ruble against the US dollar, many analysts do not anticipate a significant decline, as exporters continue to hold substantial foreign currency earnings.
The ruble’s short-term performance will largely hinge on the balance between government demand for foreign currency and the supply generated by oil exports and corporate tax payments.