Fly while it’s cheap: the Russians have acquired a record amount of currency

In July, Russians bought a record amount of foreign currency through the stock exchange, and the greatest interest in such operations was recorded in the second half of the month. This was announced by the Bank of Russia in the Financial Markets Risk Review, published on the regulator’s website. If we compare the rush demand for the purchase of foreign currency on the stock exchange with the fact that the balances on foreign currency bank accounts decreased by $3 billion in July, it turns out that the Russians most likely made purchases in order to subsequently transfer all these funds abroad, the Central Bank points out.

According to the Bank of Russia, in the second half of July, the volume of purchases by citizens of foreign currency, net of sales, amounted to 237.1 billion rubles compared to 176.1 billion rubles in June. This was a record volume of purchases in this category of participants, the Central Bank noted. Basically, purchases went through banks that make transfers to foreign accounts. The regulator recalled that “in the current geopolitical situation, it recommends taking into account the risks of delaying transfers and storing foreign currency on the accounts of organizations from unfriendly countries.”

The ruble moved in different directions last month. But when it strengthened, it happened against the backdrop of purchases by a wide range of participants: the Bank of Russia did not record a tangible concentration of such transactions with any of them. Recall that at the close of trading on June 30, the ruble strengthened to 51.5 per US dollar, while in July the Russian national currency weakened against the US by 19.8%. On the last trading day of last month, July 29, the dollar was worth 61.6 rubles per dollar on the exchange, although before that, several times during July, the dollar exchange rate was fixed above 62 rubles. Euro on the last trading day of last month cost 62.5 rubles. Experts disagreed whether such fluctuations were caused only by the rush demand for currency on the part of citizens, but they were unanimous on why such interest arose and when it would end.

Vladislav Antonov, financial analyst at BitRiver:

“In July, activity in the foreign exchange market was caused by the statement of the head of the Ministry of Finance Anton Siluanov, who proposed to carry out foreign exchange interventions and update the parameters of the budget rule. When the budget rule was renewed, interventions with the help of the currencies of friendly countries were discussed, so that “the ratio of the ruble to the dollar and the euro would change through cross-rates.” The Ministry of Finance proposed the parameters of the updated budget rule – a cut-off price of $60 per barrel of oil, while fixing its production at the level of 9.5 million barrels per day.

Siluanov also expressed dissatisfaction with the strong ruble in July, as it negatively affects the Russian budget. According to him, the growth of the dollar by one ruble brings about 130 billion rubles. income. Since a comfortable corridor for the national currency was called 70-80 rubles per dollar, citizens became interested in foreign currency in order to capitalize on the weakening of the ruble or withdraw it to foreign accounts. The review of the Central Bank does not say what kind of currency individuals bought. They could buy not only dollars and euros, but also, for example, the Chinese yuan.

Strategically speaking, the regulator has increased liquidity in the market, which is good for the economy. But it is bad that imports are slowly recovering and citizens are withdrawing funds. The weakening of the ruble took place against the backdrop of purchases by a wide range of participants. As imports recover, we can expect a further increase in the demand of market participants for foreign currency. They are waiting for updated parameters of the budget rule from the Ministry of Finance. On August 15, the tax period begins, which will prevent the weakening of the ruble until the end of the month. Plus, the price of Brent crude is trading near $100, which is also good for the ruble.”

Valery Emelyanov, stock market expert at BCS World of Investments:

“Buying on the stock exchange is the cheapest option for acquiring foreign currency, and under the conditions of sanctions, it also turned out to be extremely profitable. The spread between the cash exchange rate and the broker purchase rate exceeded 20% in July. At the same time, due to active sales by exporting companies, dollars and euros are traded as cheaply on the stock exchange as they have not been traded for many years. For those individuals who have the ability to withdraw currency abroad (that is, who have accounts abroad), buying dollars and euros is the easiest investment idea. People take the opportunity to buy cheap currency until the rates bounce back.

If you look at what is happening strategically, then we are talking about an outflow of capital from the country in the amount of about 4 billion. On the scale of the economy, this is an insignificant amount. Moreover, the Ministry of Finance and the Central Bank of the Russian Federation in every possible way encourage the withdrawal of excess currency: this weakens the ruble, benefits the budget and frees the banking system from a currency that is problematic for it. Positive in the short term, neutral in the long term.

How long will it last? As long as SWIFT works, and the dollar and euro are cheap, people will continue to buy currency for withdrawal. Of course, not in large numbers. This applies only to those who have foreign accounts and who can explain the origin of their money. For example, from the sale of a business or real estate in Russia.”

Alexander Razuvaev, Member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers:

“In my opinion, everything is simple: the exchange rate on the Moscow Exchange is the most profitable, banks and various applications do not give such a ratio of the ruble to the dollar as they do there. The difference is very big. Our citizens are well aware of their benefits.

Is it good or bad for the economy? This is good for the Ministry of Finance, the demand for foreign currency made the ruble cheaper. I am a supporter of a strong ruble. But if we talk about further actions of the financial authorities, then the Central Bank of the Russian Federation prefers not to interfere in what is happening, however, a strong ruble helps it to reduce the rate.

I think that in the end, the reserves will be unfrozen, all currency restrictions will be lifted, but unlike the times before the special operation, our citizens will continue to sell and buy foreign currency on the stock exchange directly, because they appreciated this opportunity.”