On Wednesday, Russia's Central Bank announced in a statement that it will halt the purchase of foreign currency in the domestic market until the end of 2023, starting from August 10, in an effort to reduce financial market volatility. Decisions on resuming these foreign exchange purchases will be made based on the actual conditions of the financial markets.
In conjunction with this decision, the Russian Central Bank will continue to sell foreign exchange linked to the National Welfare Fund at a rate of 23 billion rubles daily. This strategy aims to invest in permitted financial assets.
The move by the Central Bank is seen as a strategy to bolster the ruble. Following the announcement, the ruble experienced a surge, with the U.S. dollar to ruble exchange rate dropping from 97.40 to 96.70. This is significantly lower than the earlier rate of 98.39 on the same day, nearing the 100 mark. Earlier on Wednesday, the ruble had hit its lowest point in 16 months since the onset of the Russia-Ukraine conflict. So far this year, the ruble has depreciated by about 24% against the U.S. dollar, making it one of the worst-performing currencies in emerging markets.
Market analysts believe the Central Bank's decision to suspend foreign exchange purchases will likely provide substantial relief to the depreciating ruble.
Data released by the Russian Central Bank on Wednesday showed that the current account surplus (essentially the difference between exports and imports) for the first seven months of the year fell to $25.2 billion, a sharp decline from $165.4 billion in the same period last year. The surplus for July alone was $1.8 billion, compared to $17.8 billion in the same month the previous year.
