The rate of 98 per dollar became a signal for action for the Central Bank

The regulator finally intervened in the situation with the ruble

The Central Bank’s decision not to buy Chinese yuan on the domestic market until the end of the year is seen by experts as an encouraging signal for the ruble. But the question is: was the signal heard? On Wednesday, the Russian currency seemed to react to the news, slightly strengthening on the Moscow Exchange to 96.87 per dollar, but the next day the rate returned to above 97. And so far, only one conclusion suggests itself: for the regulator, the trend for the devaluation of the ruble has reached a certain extreme. , that “red line” when it is necessary to take urgent measures.

The decision was made in order to reduce the volatility of financial markets, the Central Bank explained. On the eve of the dollar rose during trading above 98 for the first time since March 2022. As a reminder, as part of the budget rule, the latest version of which has been in effect since the beginning of 2023, a base value of oil and gas revenues (8 trillion rubles annually) was introduced, and all revenues above this amount should go to the National Wealth Fund through the purchase of yuan. Operations are carried out by the Central Bank as an agent of the Ministry of Finance. Actually, this happened until the beginning of August, when Siluanov’s department announced the transition to the purchase of foreign currency for the first time since January 2023. It was planned that in the period from August 7 to September 6, 40.5 billion rubles in total, or 1.8 billion rubles a day, would be spent on this. And suddenly – such a turn.

According to the latest data from the Central Bank, the income of commodity exporters (a key source of hard currency for the country) fell to $6.9 billion in July from $16.8 billion in the same period last year. The weakness of the ruble is also due to the outflow of capital: over the year, Russians transferred about $40 billion from domestic banks to foreign ones, since interest rates in rubles fell short of inflation.

“Today, the history of March 2020 is actually repeating itself,” says financial analyst Sergei Drozdov. – Then, against the backdrop of a collapse (below $19 per barrel) drop in the price of Russian Urals oil, the exchange rate of the ruble weakened by more than 7%, to 81-82. And the Central Bank has sharply stepped up interventions to sell foreign currency on the domestic market within the framework of the budget rule. This gave a certain effect: the ruble began to gradually strengthen. What will happen now is hard to say. But it seems that on Wednesday the American currency exceeded the mark of 98 for the regulator as a signal to act: apparently, the Central Bank does not want to see news headlines about the dollar at 100. It was decided to defend this “Mannerheim line”, more precisely Nabiullina. In itself, this is a clear positive, since for a long time there was no reaction from the Central Bank, no responses to the events around the ruble, which annoyed many.

As for the Ministry of Finance, it has absolutely no reason to comment on the situation with the exchange rate, Drozdov notes: its position is invariably black and white, without halftones and nuances (unlike the position of the Central Bank), this department is categorically not interested in a strong ruble.

“The reasons for the weakening of the ruble are fundamental, stemming from the general state of the economy,” argues Mikhail Belyaev, Candidate of Economic Sciences. – And the Central Bank is still convinced that the exchange rate is determined by the momentary ratio of supply and demand in the market. That is, if you stop buying foreign currency now, then you will be able to strengthen the ruble. In reality, attempts to regulate the movement of capital are comparable to lotions for a seriously ill person. They can only give a weak and short-lived effect. And if, at the same time, we raise the key rate, we can finally say goodbye to hopes for economic and investment growth. Which in turn will work to weaken the ruble.”

Yes, Russia’s trade surplus has decreased, but this is a direct consequence of the underdevelopment of the economy, its inefficiency, and the imperfection of the business environment. If all this is not dealt with systematically, Belyaev concludes, the problems with the ruble will not disappear anywhere, momentary administrative efforts are useless here.

Boris Titov, Commissioner for the Rights of Entrepreneurs under the President of the Russian Federation, spoke rather harshly about what was happening. According to him, “the current monetary policy does not give a chance for the emergence of a developed and diverse domestic production even in a couple of years.” Before the professionals working in the Central Bank, no one set such goals. The goal is the same – inflation at 4%, the rest is not important. “But, you see, diseases are not treated with painkillers alone. We need real medicine.”

Published in the newspaper “Moskovsky Komsomolets” No. 29090 dated August 11, 2023

Newspaper headline:
“Line Nabiullina” – 98 rubles per dollar