- Russia is considering a plan to buy up to $70 billion in ‘friendly’ foreign currency, Bloomberg reported.
- Buying China’s yuan and other currencies could slow the ruble’s sharp rise, central bankers hope.
- Moscow is rethinking its FX strategy after sanctions froze half its $640 billion in foreign reserves.
The purchases would be part of a broader Kremlin strategy to weaken the Russian currency, the report said Thursday, citing people familiar with the deliberations.
The ruble plummeted in the immediate aftermath of Russia’s invasion of Ukraine in late February, as Western countries sanctioned Russia’s banking system. But it has since risen nearly 40% against the dollar, thanks to the Russian central bank’s limits on currency outflows and sharp interest-rate hike, and to earnings from energy exports.
One concern for Moscow is the currency may now be too strong against dollar and the euro. Russia’s finance minister Anton Siulanov said in June the Kremlin was ready to use its foreign-currency reserves to influence the exchange rate.
For years, Russia focused its economic policy on building up foreign-exchange reserves with the likes of the dollar and euro. But it has been working on shifting to other currencies ever since Western sanctions put half of its $640 billion in reserves in a freeze.
“In the new situation, accumulating liquid foreign exchange reserves for future crises is extremely difficult and not expedient,” a presentation of the plan said, per Bloomberg.
The strategy also calls for Russia to start selling its yuan holdings, which would make up the bulk of the purchases, in later years. Turkey’s lira, the South African rand and the United Arab Emirates’ dirham are seen as other “friendly” currencies.
The Russian central bank did not respond to an Insider request for comment.
Moscow said in June that it is working on a plan to develop a new international reserve currency alongside Brazil, India, China, and South Africa, which haven’t imposed widespread sanctions on the Kremlin.
The ruble climbed 0.83% Thursday, making one dollar worth just over 60 rubles. China’s offshore yuan jumped after news of Russia’s plan broke, but had slipped 0.14% against the greenback at last check.