On Wednesday, Russia announced its intention to increase its sales of Chinese yuan by 17% starting on Feb. 7, aiming to bolster the rouble amidst rising volatility caused by Western sanctions and global forex market turbulence.
Through a complex foreign currency mechanism, the central bank trades forex to maintain supply in the domestic market and to execute transactions on behalf of the finance ministry, which oversees the National Wealth Fund (NWF) for emergency purposes.
The finance ministry disclosed plans to decrease its purchases of foreign currency and gold in the upcoming month, leading to an overall increase in the state's forex sales to provide support for the rouble.
During the period of Feb. 7 to March 6, the finance ministry is slated to buy foreign currencies and gold worth 66.5 billion roubles, equivalent to 3.3 billion roubles per day, down from the previous period's 70.2 billion roubles or 4.1 billion roubles per day.
This adjustment will elevate the combined net forex sales by the government and central bank to 5.56 billion roubles per day from Feb. 7, up from 4.76 billion roubles previously.
Owing to Western sanctions limiting transactions in dollars and euros, the central bank relies on the Chinese yuan for forex interventions as it remains the most traded foreign currency in Russia.
At 0930 GMT, the rouble had strengthened by 2.2% to 98.50 against the dollar and by 0.13% to 13.27 against the Chinese yuan on the Moscow Stock Exchange (MOEX).
Despite recent Western sanctions targeting oil sales, Russia's primary export, the rouble has surged by 13% against the dollar this year, supported by reduced demand from Russian importers during the New Year holiday season.
The central bank highlighted ongoing exchange rate volatility due to challenges with cross-border payments and a shrinking current account surplus in dealings with Russia's trade partners.
In a related development, following the conclusion of China's Lunar New Year holiday, the central bank reduced its yuan swap operations by 50% to 5 billion yuan, allowing Russian banks to replenish their yuan reserves.