Russia's Central Bank has taken a significant step by announcing the suspension of buying foreign currency on the domestic market for the rest of 2024. This decision comes as the ruble continues to face challenges and slide to its lowest levels since Russia's invasion of Ukraine in 2022. The move aims to reduce volatility in the financial markets and stabilize the situation. "Russia's Central Bank's Stance on Foreign Currency and Its Impact"
Reasons for the Suspension
The decision to halt foreign currency purchases from Thursday until December 31 is a strategic one. As stated by the Russian regulator, it seeks to address the issue of volatility in the financial markets. By pausing these purchases, the Central Bank hopes to create a more stable environment for the ruble.This is not the first time such a measure has been taken. Previously, the Bank suspended planned foreign currency purchases from August 10, 2023, until December 31, 2023, due to the added pressure on the falling ruble at that time. The current suspension is an extension of this policy in light of the ongoing challenges faced by the Russian currency.Impact on the Ruble
This year's suspension comes at a time when the ruble has been trading at its lowest levels in more than 32 months. It reached as low as 113 to the dollar for the first time since March 2022. While Finance Minister Anton Siluanov believes that a weaker ruble benefits Russian exports, it also fuels inflation. Reuters reports that the ruble's four-month fall could add 1.5 percentage points to the current inflation rate of 8.5%.The Central Bank has set the ruble's official exchange rate at 108.01 to the dollar and 113.09 to the euro for Thursday. This indicates the bank's efforts to maintain some level of control over the currency's value.Other Measures Taken
In addition to the suspension of foreign currency purchases, the Central Bank will continue selling foreign currency through its sovereign wealth fund. It plans to sell the equivalent of 8.4 billion rubles per day in the second half of 2024. This shows that the bank is taking a multi-faceted approach to manage the situation and support the ruble.Overall, Russia's Central Bank's decision on foreign currency purchases is a complex one that aims to balance the needs of the economy and the stability of the financial markets. It remains to be seen how these measures will play out in the coming months and what impact they will have on the Russian economy.
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