© Reuters. A customer hands Russian ruble banknotes to a vendor at a market in St. Petersburg, Russia, July 9, 2023. REUTERS/Anton Vaganov/File Photo
(Reuters) – Russia’s central bank said on Friday that it will resume its foreign exchange interventions based on the investments of the National Wealth Fund from Aug. 1, as well as reverse the operations of the Finance Ministry under the budget rule.
It said the maximum for such foreign exchange interventions was 300 billion rubles ($3.33 billion) every half year to take into account the liquidity situation in the local foreign exchange market.
“Another bomb from the Central Bank,” economist Yevgeny Suvorov wrote on Telegram. Less than an hour ago, the Bank raised its key interest rate by more than expected by 100 basis points, to 8.5%.
Under the budget law, Russia sells from the fund to make up for the shortfall in oil and gas revenues. It resumed those interventions in January after a hiatus of several months, ignoring what Western currencies call “unfriendly”.
The Central Bank said that, in addition to carrying out these operations on behalf of the Ministry of Finance, it will also carry out foreign exchange interventions related to NWF investments in ruble-denominated assets.
The daily volume of operations will determine the balance of regular foreign exchange operations and investments from the NWF Fund, Russia’s Rainy Day Fund, which accumulates energy proceeds.
From January to June of this year, the bank said that the net volume of NWF funds invested in related ruble assets amounted to 288.4 billion rubles, which means that the daily volume of its operations from August 1 to January 31, 2024 will be 2.3 billion rubles.
The bank said it would buy or sell foreign currencies evenly throughout the day to minimize the impact on the market.
The Bank of Russia has reversed NWF investments in the past.
“Due to a number of circumstances, this has been suspended,” Russia’s Central Bank Governor Elvira Nabiullina said on Friday. “We think it’s time to get back to this practice. This is not intended to affect the price of the ruble, it is really intended to reverse our operations.”
The move to yuan operations illustrates the growing importance of China’s currency in Moscow’s efforts to ensure economic stability amid Western sanctions.
Nabiullina said on Friday that about 1% of citizens’ deposits are held in yuan.
($1 = 90.1675 rubles)