03.07.2022
Chicago 11, Melborne City, USA
Market

Against the background of a record strengthening of the ruble, the Central Bank removes some of the currency restrictions

The regulator allowed banks to sell currency without limit, but with one important exception.

The exchange rate of the ruble on the Moscow Exchange is growing to multi-year highs – in just two months, instead of 120 rubles, the dollar costs more than half as much. So, today the dollar fell below 57 rubles, the euro – below 60 rubles. These are rates corresponding approximately to 2017-2018, which indicates a serious imbalance in the foreign exchange market.

In the cash market, however, the dollar can be sold for 69 rubles, and bought for 73 rubles., euro – respectively, for 76 and 79 rubles. The problem of isolation of the cash market from the currency exchange is connected with the existing currency restrictions from the Central Bank.

So, from March 9, banks could not sell cash currency, as well as issue it from foreign currency accounts (except for that received before March 9, and not more than 10 thousand dollars). From mid-April, the ban was softened – banks were allowed to sell currency in cash, but only received at the cash desks of banks after April 9. In order to have at least some amount of currency in reserve, banks set increased buying and selling rates – but even in this form it is difficult to find a sufficient amount of dollars or euros for sale.

The Central Bank has already eased restrictions several times – for example, by allowing exporters to sell the currency not immediately, as well as increasing the limits on transfers abroad from 10 to 50 thousand dollars.

But the ruble is still growing, against this background, the Central Bank decided to remove another restriction. Now, from May 20, banks can unlimitedly sell cash currency to citizens (that is, regardless of the date it was received by the bank). But with an exception – this does not apply to dollars and euros, for which the existing restrictions are valid until September 9.

I.e, It will now be possible to buy yuan, tenge, pounds sterling or Swiss francs at the bank’s cash desk without restrictions. The Central Bank explained this by the fact that banks still have enough foreign banknotes in stock.

At the same time, keeping the extremely low exchange rate of the dollar and the euro damages the economy – exporters are forced to sell their foreign exchange earnings too cheaply, while the ruble expenses for them have increased (at least due to inflation). The state earns less on the export of oil and gas, and at the current rate there are big risks that the federal budget will be reduced to a deficit. So far, the situation is being saved by high oil and gas prices, but due to sanctions, Russia is already selling oil at a large discount to the marker grade Brent.

If the situation does not stabilize, the Central Bank is likely to cancel another part of the currency restrictions ahead of schedule.

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