The weakening of the trade balance was the main factor behind the weakening of the ruble

The main factor behind the weakening of the ruble in June-July 2023 was the weakening of the trade balance, the Central Bank demonstrates in the current review of financial markets, but the scenario in which it was realized is non-standard. Thus, the temporary contribution of the transition to the settlement of Russian exports in rubles was comparable to the contribution of the growing role of the yuan in the cross-border settlements of the Russian Federation, large exporters are unlikely to be involved in what is happening, and the “mutiny” in the Russian Federation at the end of June could more likely restrain the recovery of the exchange rate in July than weaken him.

The Bank of Russia in its Financial Markets Risk Review for June provided part of the explanation for the depreciation of the ruble against the currencies of foreign trade transactions. In June, it amounted to 10.4% (in May – 1%), while against the backdrop of a decrease in monetary volumes of exports and a constant, at least until recently, growth in imports, the trade balance decreased significantly, although it remains quite strong, In many respects, the country risks for the Russian Federation, which radically increased in 2022, were partly offset by the consequences of the extraordinary high export earnings of last year. Nevertheless, the weakening of the ruble, which has been taking place without visible strong reasons since the end of June, has increased the anxiety of the financial markets and caused many versions of what is happening – from a large one-time deal with Russian assets to the impact of the “Prigozhin rebellion” on the exchange rate.

As analysts of the Central Bank demonstrate, the current devaluation of the ruble has enough standard explanations, albeit with non-standard details. According to the Central Bank, in June, exporters actually sold less foreign currency ($7 billion) than in May (by 22.9%). However, there is no need to talk about a radical “thinning” of the dollar market in the Russian Federation. Thus, the share of the yuan in exchange turnover is growing, in June it was 39.8%. Nevertheless, the market turnover itself in June was higher than in May, which slowed down the rate of its de-dollarization. On the contrary, they were increased by an increase in the share of foreign trade ruble settlements – apparently, we are talking about servicing imports through the EAEU countries, where the volumes of ruble assets are quite large.

The transition to ruble settlements in foreign trade in the medium term should be more or less neutral with respect to the exchange rate or even strengthen it – Russia, apparently, remains a net exporter of capital. However, the process of “pumping out” rubles from partner countries is clearly non-linear – and this could create additional pressure on the exchange rate in June. The Central Bank gives estimates of sales of foreign exchange earnings by exporters only for May, there are no data for June yet, but they are unlikely to differ radically – key exporters sold about 90% of the currency received from exports, which is more than the average of 80% in previous years.

The currency mini-crisis itself, apparently, was really provoked by the political instability at the end of June. However, even here the picture in detail does not look the same as in the consolidated statistics. Thus, the share of “largest buyers” in currency purchases has sharply increased, especially the “largest”, in which it is difficult not to recognize the largest bank of the Russian Federation. He increased his market share from 10% to 40%, three more of the remaining five largest buyers doubled: some borrowers converted foreign currency loans into rubles due to the weakening of the exchange rate, and banks had to balance their open foreign exchange positions.

Finally, the population almost did not take part in what was happening: on June 24, individuals bought currencies for 7.1 billion rubles. (insignificant amounts for the foreign exchange market), mainly by converting non-cash rubles in bank accounts into non-cash currency. However, since the whole of June, individuals were mainly selling foreign currency, the positive balance of dollarization at the end of June is not worth discussing – 300 million rubles. However, it is highly likely that the June events are now post factum keeping the exchange rate from a reverse correction – the data on the July turnover of the currency markets will show how much the markets actually assessed what is happening.

Dmitry Butrin