Russia’s Finance Ministry is set to significantly increase its foreign currency purchases, planning to buy 279.4 billion rubles (around $3.3 billion) in foreign currency from October 7 to November 6. This sixfold increase compared to previous levels could exert pressure on the ruble, though analysts suggest that higher oil revenues and increased currency sales by exporters may mitigate the impact.
The move comes in response to rising oil prices, which averaged $92.10 per barrel in September, up from $67.10 in August. This price surge is expected to enhance government energy tax revenues, with oil and gas income predicted to surpass the fiscal rule’s baseline by roughly 290 billion rubles.
While the Finance Ministry’s heightened foreign currency purchases might weaken the ruble, the elevated oil prices could also boost foreign currency earnings for energy exporters. These companies may sell a larger portion of their earnings to meet tax obligations, thereby supporting the Russian currency.
Analysts caution that the timing of government purchases, export revenues, and tax payments could lead to fluctuations in the exchange rate. Although some forecasts indicate the increased purchases could lead to a weaker ruble against the US dollar, many analysts do not anticipate a steep decline, as exporters are likely to continue holding substantial foreign currency earnings.
The ruble’s short-term performance will thus hinge on the interplay between government demand for foreign currency and the supply generated by oil exports and corporate tax payments. This balance will be crucial in determining the currency’s trajectory in the coming weeks.