Russians prefer “toxic” currency

In the Financial Markets Risk Review for October published yesterday, the Central Bank spoke about the shortage of foreign exchange liquidity. It was the result of an increased “risk of expanding sanctions and an outflow of foreign exchange liabilities” from banks. In the first half of last month, the outflow of funds from legal entities and individuals (by $9.4 billion) was fixed against the backdrop of the need to settle the open foreign exchange position. Banks were unable to promptly and synchronously reduce foreign exchange assets, the regulator notes.

“Against the background of clearing members’ fears about the expansion of sanctions, the supply of currency on the domestic market also decreased,” the review says. “Due to Western sanctions that froze almost half of the gold and foreign exchange reserves, the Central Bank could not help banks cover the currency swap. The situation was saved only by the fact that in October there were no sanctions against the NCC (the clearing center of the Moscow Exchange). Although the situation with the inflow of foreign currency has normalized, what happened makes the Central Bank recommend that banks actively work on devaluation of assets.

The factors that caused the shortage of foreign exchange liquidity in October also reduced the volume of trading in “toxic” currencies (dollar and euro), the authors of the review explain. Thus, the share of currencies of friendly countries (mainly yuan) in the exchange market continued to grow – in October to 31% of the trading volume against 27% in September. The main buyers of the “friendly” currency are exporters (see chart). However, “the main net buyers of currency on the exchange were banks that were not systemically important, purchasing currency for importers, as well as other clients in order to make international transfers,” the Central Bank notes. The volume of such purchases increased in October to 677.6 billion from 531.6 billion rubles. in September, primarily due to the operations of Russians who opened accounts in friendly countries, as well as servicing parallel imports. In October, individuals increased their net purchases of foreign currency, buying it on the exchange and over-the-counter markets in the amount of 73.8 billion rubles, while 70.9 billion rubles. fell on the “toxic” currency, the yuan was bought for only 2.9 billion rubles. Purchases of dollars and euros, as a month earlier, were carried out by individuals through the stock exchange (for 115.7 billion rubles), on the over-the-counter market these currencies were sold for 44.9 billion rubles.

Artem Chugunov