Russia’s Finance Ministry is set to significantly increase its daily foreign currency purchases in October, a move that could exert pressure on the ruble. The ministry plans to buy 279.4 billion rubles (around US$3.3 billion) in foreign currency from October 7 to November 6, under the country’s fiscal rule. This represents a more than sixfold increase compared to previous levels, with net daily purchases expected to rise from 1.9 billion rubles to 12.1 billion rubles after accounting for the central bank’s currency sales.
This decision comes in the wake of rising oil prices, which jumped to an average of US$92.10 per barrel in September from US$67.10 in August. The higher prices are anticipated to boost government energy tax revenues, with oil and gas income likely to surpass the fiscal rule’s baseline by nearly 290 billion rubles. While the increased government purchases are expected to weaken the ruble, the higher oil prices could simultaneously provide additional foreign currency earnings for energy exporters, who might sell more of these earnings to meet tax obligations, thus supporting the Russian currency.
Analysts caution that the timing of government purchases, export revenues, and tax payments could lead to exchange rate fluctuations. Although some projections suggest the increased purchases could weaken the ruble against the US dollar, several analysts remain skeptical of a sharp decline due to the substantial foreign currency earnings held by exporters.
The ruble’s short-term performance will largely depend on the interplay between government demand for foreign currency and the supply generated by oil exports and corporate tax payments. This balancing act will be crucial in determining the currency’s stability in the coming weeks.
