“Our” currency – the Ministry of Finance is not yet buying, but the Central Bank is already selling
Control currency shot
The Bank of Russia announces its readiness to sell foreign currency for settlements on Eurobonds, while the head of the Ministry of Finance speaks of its readiness and even the need to buy foreign currency. It is absolutely incomprehensible why the Central Bank and the Ministry of Finance are not able to do what they want, simultaneously, without confusing the public and without helping speculative games on the exchange rates?
The recent excess of the dollar exchange rate mark of 100 rubles was perceived in Russia as something like a “control shot” in the confrontation with the West. However, it worked out again: the Central Bank of the Russian Federation, by raising the key rate, also increased the attractiveness of ruble deposits and instruments.
A normal consequence of this was an increase in demand for rubles and a strengthening, albeit small, of the national currency. However, the regulator simply does not have the right to stop there, since the pressure on the ruble associated with imbalances in the balance sheet and the leakage of currency abroad is unlikely to ease.
Unfortunately, we can’t count on a serious increase in oil prices; besides, our own people are playing against the ruble, making excess profits from selling the currency at an inflated rate. Nevertheless, the Bank of Russia is now faced with the need to sell currency for another reason - it will have to pay off the issue of Eurobonds on September 16th.
The sanctions practically forced the main creditor and the regulator to pay coupons in rubles. However, foreign holders of Russian securities, as follows from the materials of the Central Bank of the Russian Federation, preferred to get rid of rubles by selling them on the stock exchange. Therefore, it was decided to return to paying interest in foreign currency.
Thus, they, foreigners, and not just some notorious unidentified speculators, seem to have collapsed the exchange rate of the national currency at the end of August. At least, this is exactly the conclusion that the Central Bank of the Russian Federation wants to present to us. Now the Bank of Russia has already announced massive sales of foreign currency.
Bank quote book
From the official statement of the Central Bank of the Russian Federation it became known that from September 14 to 22, the bank will sell 150 billion rubles. Daily sales volumes will increase these days by almost ten times compared to usual - up to 21,4 billion rubles instead of 2,3 billion rubles.
All this was announced surprisingly simultaneously with the Minister of Finance, who stated that it was still necessary to buy Russian currency. We read further in the materials of the Central Bank:
“The issue volume of this issue is 3 billion US dollars. Payments to Eurobond holders in accordance with the established procedure will be made by the Russian Ministry of Finance in rubles, and therefore some of the Eurobond holders after their redemption may present additional demand for foreign currency.
Under these conditions, the decision to redistribute sales of foreign currency within the framework of mirroring transactions related to the investment of funds of the National Welfare Fund will help satisfy possible additional demand for foreign currency and reduce volatility in the foreign exchange market during this period.”
Under these conditions, the decision to redistribute sales of foreign currency within the framework of mirroring transactions related to the investment of funds of the National Welfare Fund will help satisfy possible additional demand for foreign currency and reduce volatility in the foreign exchange market during this period.”
We apologize for the too long quote, but if they write to us about the volumes of foreign currency that are subject to sale as part of mirroring transactions, you will involuntarily begin to doubt something. After all, we are talking about investing funds from the National Welfare Fund in the first half of 2023.
You will have to pay for your money with your own money during the period from September 25, 2023 to January 31, 2024. And also with interest. Again, something and someone is shifting from one pocket to another, as was the case with the sale of Sberbank to the government of the country.
By whom? Yes, again, the Central Bank! Indeed, why does he, once the main shareholder, need such a burden? Ballast on balance. Now the Central Bank of the Russian Federation will pay it off, and for two whole years you will be free like the wind. There will be no need to pay off such volumes of Eurobonds in the near future.
Currency is a currency, but it’s hard to believe that sales of the Central Bank will in any way bring down its exchange rate. It’s not just that Elvira Nabiullina has already hinted that on September 15 we can expect another increase in the key rate. So what, you couldn’t wait?
Is the buyer always right?
But let’s turn instead to the Ministry of Finance - hardly the worst possible buyer of currency from the Central Bank. Anton Siluanov, of course, made a reservation that the Ministry of Finance is preparing to buy the currencies of friendly countries, such as the yuan, and the Bank of Russia will most likely sell dollars and euros.
Maybe extra? And in the end, what is the difference between convertible currencies, which ones are sold and which ones are bought. If only it didn’t hit the ruble. And why does the Ministry of Finance need foreign currency at all and why doesn’t it immediately be sent there from the Central Bank of the Russian Federation?
Or maybe the very independence of our very Central of all central banks in the world is to blame for everything? The Ministry of Finance says that they buy currency within the framework of the budget rule - that is, that which exceeds the level established by law.
Look what Minister Siluanov says about this:
“If we decide to go out with purchases, we will proceed from the restoration of the current budget rule, that is, we have a cut-off price of 44,2 dollars, and everything that is higher can be sent to the National Welfare Fund.”
Here again this National Welfare Fund is some kind of enchanted fund, from which they seem to take money, and then also pay interest on it in foreign currency (and it seems that our own Central Bank is doing all this).
And here you are - the Ministry of Finance has decided to replenish the National Welfare Fund again? So why not immediately take and deposit into this Fund the very currency that the Central Bank will sell? Why give coupons instead of rubles to adversaries?
But what, our Central Bank cannot live according to the same scheme as the Ministry of Finance, and according to some similar “budget rule”? And you also don’t have the right to sell the currency directly to the Ministry of Finance? Otherwise, the Central Bank sells something to someone, and “someone here and there sometimes,” as in the song, receives a commission.
The Ministry of Finance buys foreign currency according to the rule,” but are commissions also due to someone somewhere and for something? This is how we live, some don’t buy, but for now, and some don’t sell, and also for now.
As a result, as the famous financial analyst Vladislav Antonov noted, “despite the rise in oil prices, the ruble may continue to decline due to the imbalance between supply and demand.” And the increase in foreign currency purchases by the Ministry of Finance is another factor not in favor of the growth of the ruble exchange rate.
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