Bank of Russia comments on FX market operations
The Bank of Russia will temporarily accelerate the previously announced operations to mirror transactions associated with the National Wealth Fund (NWF) money investment in 2023 H1. From 14 to 22 September 2023, the Bank of Russia will consistently sell foreign currency in the foreign exchange market for a total amount of ₽150 billion. This means that the daily amount of these operations of the Bank of Russia during the said period will reach ₽21.4 billion instead of ₽2.3 billion.
The decision to adjust the daily volume of operations during this period is a response to the upcoming redemption of the Russian Federation Eurobond issue scheduled for 16 September 2023 in the amount of $3 billion. According to the established procedure,1 the Ministry of Finance will make payments to Eurobond holders in rubles. Following the redemption of the bonds, some Eurobond holders may show additional demand for foreign currency. The Bank of Russia’s decision to redistribute foreign currency sales through mirroring transactions related to the NWF funds investment will help satisfy the potential demand for foreign currency and reduce volatility in the foreign exchange market during this period.
The Bank of Russia analysed the current structure of Eurobond holders and their potential demand for foreign currency to determine the volume of mirroring operations during this period. Taking into account the fact that Russian credit institutions hold a significant portion of the Eurobond issue, the Bank of Russia also analysed the impact of the Eurobond redemption on the foreign exchange position of these banks, including via a series of consultations with them.
The remaining amount of foreign currency sales as part of the mirroring transactions related to the NWF funds investment will be evenly spread between 25 September 2023 and 31 January 2024.
In the next two years, there will be no significant repayments on foreign currency Eurobonds of the Russian Federation comparable in the amount to the issue redeemed this year. The next scheduled repayment date for the €1.75 billion foreign currency issue is 4 December 2025.