In October, Russia’s Finance Ministry plans to significantly ramp up its foreign currency purchases, a move that may exert further pressure on the ruble. The ministry aims to buy 279.4 billion rubles (roughly US$3.3 billion) in foreign currency from October 7 to November 6, following the country’s fiscal rule. This marks a substantial increase in net daily purchases, expected to reach 12.1 billion rubles compared to the previous 1.9 billion rubles.
This decision comes in the wake of rising oil prices, which averaged US$92.10 per barrel in September, up from US$67.10 in August. The higher oil prices are anticipated to boost government energy tax revenues, with projected oil and gas income surpassing the fiscal rule’s baseline by nearly 290 billion rubles.
While the increased government purchases could potentially weaken the ruble, analysts believe that the higher oil prices might also lead to additional foreign currency earnings for Russian energy exporters. These companies may sell more of their earnings to fulfill tax obligations, which could provide some support for the ruble.
Analysts warn that the timing of government purchases, along with export revenues and tax payments, could lead to fluctuations in the exchange rate. Although some estimates suggest that the increased currency purchases might weaken the ruble against the US dollar, many analysts do not expect a sharp decline. This is attributed to exporters retaining substantial foreign currency earnings.
The ruble’s short-term performance will largely depend on the balance between the government’s demand for foreign currency and the supply generated by oil exports and corporate tax payments. The interplay of these factors will determine the extent of the impact on the Russian currency.
