Russians bought a record amount of dollars and euros in December: the reason was named

Experts explained why the population continues to purchase toxic currencies

In December 2023, our citizens bought dollars and euros worth 179 billion rubles. This is almost 10% more than in November, the Bank of Russia reported in its review of financial market risks. Over the entire past year, the peak months when Russians frantically purchased foreign currency were March and the period from October to December. Experts told MK about why compatriots again began to buy the currencies of unfriendly countries, whether their interest will continue in the future and whether it will affect the ruble exchange rate.

The Bank of Russia associated the increased demand for dollars and euros with seasonality, that is, with the long New Year holidays, which many citizens prefer to spend abroad. Independent experts partly agree with this. According to Freedom Finance Global leading analyst Natalya Milchakova, many Russians chose to spend the beginning of the year abroad, most often in Turkey and Egypt, and instead of Europe they flew to the UAE and Thailand. Moreover, prices for tours to Turkey, Egypt and the UAE in December 2023 even decreased compared to November, which stimulated an increase in interest in holidays in these countries and at the same time the desire to buy “reliable” banknotes, that is, dollars and euros. “Nevertheless, the demand for currency in December 2023, although quite high, still did not reach the highs of June and July 2022, when interest was spurred by fears of a further collapse of the ruble,” Milchakova noted. — We do not forecast the dollar to rise above 100 rubles and the euro to rise above 110 rubles this year. Therefore, most likely, the maximum surge in demand for currency can be expected again in December, on the eve of the New Year holidays.”

However, there is another opinion. According to financial analyst Andrei Vernikov, the increased demand for the dollar and euro is associated with rising inflation expectations of the population, which intensified against the backdrop of falling oil prices. At the same time, citizens understand that the scenario of Western sanctions and blocking of euro and dollar accounts on the Moscow Exchange can be realized in 2024. The winners will be those who bought cash currency. “The state has reset dollar and euro positions in the National Welfare Fund, and the population traditionally keeps euros and dollars in cash,” the expert explained. “Many other recipes to reduce the damage from ruble inflation, for example, buying a dirham, the rate of which is pegged to the dollar, or buying replacement bonds are not attractive for many citizens due to low financial literacy.” The analyst is confident that at the beginning of 2024, Russians will not be so active in buying foreign currency: after the period of New Year payments there will be some kind of dip in income. But starting in May, due to the holiday season, traditionally the demand for currency will begin to grow again. “As for the ruble, I expect its gradual weakening and this is due to the tight budget of 2024,” Vernikov said. — The authorities are interested in increasing the ruble revenues of the state treasury by weakening the ruble. The rate of 105 rubles per dollar at the end of this year will not surprise me.”

Increasing demand from the population for toxic currency, although not patriotic, is logical. As Maxim Osadchiy, head of the analytical department at BKF Bank, pointed out, after the level of 100 rubles per dollar was once again broken in October last year, we can expect that in the coming year the dollar will again overcome this “psychological barrier.” Therefore, the population’s demand for dollars and euros demonstrates a countercyclical trend (actions aimed at smoothing out the waves of the cycle of appreciation and depreciation of the ruble), increasing as they weaken according to the principle: “Run in, it’s cheaper!” In addition, the traditional injection of budget funds into the economy at the end of the year also had an impact. As for the population’s demand for dollars and euros in connection with the desire of Russians to spend the New Year holidays abroad, this factor should not be overestimated: in December, the average Russian bought about 13 dollars worth of foreign currency, Osadchiy emphasized.