Russia’s Finance Ministry is set to significantly increase its daily purchases of foreign currency in October, a move that could exert additional pressure on the ruble. The ministry plans to acquire 279.4 billion rubles (approximately US$3.3 billion) in foreign currency from October 7 to November 6 under Russia’s fiscal rule. This marks an increase in net daily purchases to 12.1 billion rubles from the previous rate of 1.9 billion rubles.
The decision follows a substantial rise in oil prices, which averaged US$92.10 per barrel in September, up from US$67.10 in August. The higher oil prices are expected to boost government revenues from energy taxes, with oil and gas income anticipated to surpass the fiscal rule’s baseline by nearly 290 billion rubles.
While increased government purchases of foreign currency could potentially weaken the ruble, analysts suggest that higher oil prices might offset this effect. Energy exporters are likely to earn additional foreign currency, which they may sell to meet tax obligations, providing support for the ruble.
However, analysts have cautioned that the timing of government currency purchases, alongside export revenues and tax payment schedules, could lead to fluctuations in the exchange rate. Although there are concerns that the ruble could weaken against the US dollar, several analysts believe a sharp decline is unlikely, as exporters are expected to retain substantial foreign currency earnings.
The performance of the ruble in the near term will largely depend on the interplay between the government’s demand for foreign currency and the supply generated by oil exports and corporate tax payments.