Foreign Currency

Russia’s FX sales rise to 6.3 bln roubles in May as finmin halves purchases

UPDATE 1-Russia’s FX sales rise to 6.3 bln roubles in May as finmin halves purchases

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MOSCOW, May 6 (Reuters)Russia’s finance ministry said on Monday that it would halve its purchases of foreign currency and gold in the month ahead, a move that will increase the state’s overall forex sales.

The finance ministry said its purchases of foreign currencies and gold for the period from May 8 to June 6 would amount to the equivalent of 110.94 billion roubles ($1.21 billion), or 5.55 billion roubles per day.

Due to other interventions the central bank carries out, the Russian state will continue making FX sales throughout May with overall sales increasing to 6.3 billion roubles from 0.6 billion roubles a day in the previous month.

In the previous period, between April 5 and May 7, the ministry had planned to buy foreign currency worth 235.3 billion roubles ($2.57 billion), or 11.2 billion roubles per day.

Under its budget rule, Russia sells foreign currency from its National Wealth Fund (NWF) to make up for any shortfall in revenue from oil and gas exports, or makes purchases in the event of a surplus.

Proceeds from oil and gas sales for Russia’s federal budget down to 1.23 trillion roubles in April from 1.3 trillion roubles in March, ministry data showed.

The central bank conducts FX interventions on the finance ministry’s behalf. Meanwhile, in August 2023, the central bank stopped foreign currency purchases until the new year to avoid aggravating pressure on the rouble, which tumbled past 100 to the dollar in August and October.

This year the central bank in addition to the regular operations of the Ministry of Finance to the budget rule is selling forex to compensate for money spent from Russia’s rainy-day fund in 2023.

“The increase in the volume of currency sales in May, coupled with the delayed effects of the growing foreign trade surplus in March, will continue to support the rouble in May and June”, – said Astra Asset Management economist Dmitry Polevoy, adding that preservation of high Central Bank rate is another plus for the rouble.

As a result, he assumes that in coming two months the rouble may gravitate to the range of 90-93/USD followed by a moderate weakening to 95-100 by the end of the year.

The ministry was selling Chinese yuan for the first half of 2023 as Western sanctions imposed over Russia’s actions in Ukraine hit energy revenues. It reverted to purchases in August as commodity prices rose and energy revenues recovered.

($1 = 91.5625 roubles)

Reporting by Darya Korsunskaya; Writing by Anastasia Teterevleva and Darya Korsunskaya; Editing by Christina Fincher/Guy Faulconbridge

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