Russia’s Finance Ministry is set to significantly increase its daily foreign currency purchases in October, a move that could exert additional pressure on the ruble. The ministry plans to buy 279.4 billion rubles (around US$3.3 billion) worth of foreign currency from October 7 to November 6 as part of the nation’s fiscal strategy. This will escalate net daily purchases to 12.1 billion rubles, up from the previous 1.9 billion rubles.
This decision comes in the wake of rising oil prices, which averaged US$92.10 per barrel in September compared to US$67.10 in August. The surge in oil prices is expected to enhance the government’s energy tax revenues, with oil and gas income anticipated to surpass the fiscal rule’s baseline by nearly 290 billion rubles.
While the increased foreign currency purchases by the government have the potential to weaken the ruble, higher oil prices might also result in additional foreign currency earnings for energy exporters. These companies are likely to sell more of their earnings to fulfill tax obligations, which could provide some support for the Russian currency.
Analysts are cautious about the timing of government purchases, export revenues, and tax payments, which might cause fluctuations in the exchange rate. Although some forecasts suggest that the increased purchases could lead to a weaker ruble against the US dollar, many analysts do not anticipate a significant decline due to the substantial foreign currency earnings held by exporters.
The ruble’s performance in the near future will largely depend on the balance between the government’s demand for foreign currency and the supply generated by oil exports and corporate tax payments. This delicate balance will be crucial in determining the ruble’s stability in the coming weeks.