The Central Bank of Russia has stepped up its efforts to sell RMB in the Moscow foreign exchange market, what kind of caution does Moscow play?

Mars macroscopic

2024-05-11 10:45Posted in Hunan Finance and Economics Creator

Executive Summary:

Since late February this year, the exchange rate of the renminbi against the ruble in the Moscow foreign exchange market has been under obvious external pressure, and it is difficult to continue to rise. It turned out that the Central Bank of Russia raised the volume of yuan sales from 600 million rubles per day in February to 2.2 billion rubles per day in May. What is Russia's careful thinking about doing this?

Saburo noted that since February 23, 2024, when the yuan against the ruble on the Moscow Foreign Exchange hit a new high of 1:13.2591 rubles, the exchange rate of the yuan against the ruble has been under obvious external pressure and it is difficult to continue to rise.

First of all, there are obvious traces of repression. On the second day after hitting a new high on February 23, the yuan was briefly suppressed against the ruble to a minimum of 12.7252, down 4.03% from the previous day's high. The fluctuation of 1% in the foreign exchange market is relatively drastic, and this kind of violent fluctuation of more than 4% is rare in the exchange rate market of most large countries. Obviously, this cannot be the work of market forces, such as the Central Bank of Russia or the Russian Ministry of Finance deliberately placing large orders to sell the yuan.

Secondly, for more than two months since then, the RMB has been fluctuating up and down at 1:12.7. On April 17, it once broke through 1:13.0513, and immediately encountered a large amount of RMB selling, and then continued to suppress the RMB to 1:12.5806 for a week.

An economic analysis article in the Moscow Times on May 10 confirmed Saburo's speculation. The article revealed that the Bank of Russia will continue to increase its RMB sales in May after three consecutive months of increasing RMB sales.

According to Russia's fiscal rules, the Central Bank of Russia raised the value of RMB sales to 2.2 billion rubles per day, while at the beginning of February, the Central Bank of Russia sold only 600 million rubles per day. It expanded by 2.67 times in 3 months. The yuan sold by the Central Bank of Russia in the foreign exchange market came from the Russian National Welfare Fund (NWF).

The budget rules for the period from May 8 to June 6, published by the Russian Ministry of Finance on May 6, also disclosed the increase in the daily quota of the Central Bank's sales of renminbi to 2.2 billion rubles. The Russian National Welfare Fund (NWF) is managed by the Russian Ministry of Finance.

The total amount of foreign exchange purchases planned by the Ministry of Finance in May is worth 192 billion rubles or 9.6 billion rubles per day. The renminbi sold accounted for 23% of that.

Analysts of the Central Bank of Russia believe that "support for the ruble can be strengthened, considering that since the beginning of this year, the Bank of Russia has sold 11.8 billion rubles worth of foreign exchange per day and 2.2 billion rubles worth of yuan per day".

Stimulated by the news, on Friday, the ruble strengthened against the yuan, which fell to 1:12.7733 against the ruble from yesterday's close of 1:12.8383, the yuan fell 0.5%, and the ruble rose 0.51%. The dollar rose against the ruble from 1:91.3790 to 1:92.6688, the dollar rose by 1.4%, and the ruble fell by 1.39%.

Analysts at the Central Bank of Russia believe that the sale of the yuan to stabilize the ruble exchange rate will help Russia export crude oil. The Russian Ministry of Finance's budget plan for May, which set the average price of a barrel of Urals crude at $76.2 and the dollar-ruble exchange rate at 93 rubles in April, also took into account a possible reduction in oil production in the second quarter of 2024 under the OPEC+ agreement.

Analysts of the Central Bank of Russia believe that since the international oil market is priced in dollars, the rise of the dollar against the ruble means that the export price of Russian oil denominated in dollars will decrease, which is conducive to the export competition of seaborne oil. Since the trade between China and Russia is mainly based on the yuan, the ruble has strengthened against the yuan, and the yuan has weakened, as Russia's largest oil export market, it is conducive to Russia to export the same oil to China and can receive more yuan.

Based on this logic, analysts at the Central Bank of Russia estimate that Russia's oil and gas revenues will increase to 177 billion rubles in May, up from 128 billion rubles in April.

[Author: Xu Sanlang]

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