- According to Bloomberg, Russia is considering plans to buy up to $70 billion in “friendly” foreign currency.
- The central bank hopes that buying the Chinese yuan and other currencies could slow the ruble’s sharp appreciation.
- Moscow is rethinking its currency strategy after sanctions froze half of its $640 billion foreign exchange reserves.
Bloomberg reports that Russia is considering buying up to $70 billion in yuan and other currencies from “friendly countries” to stem the ruble’s surge.
The purchase would be part of the Kremlin’s broader strategy to undermine the Russian currency, the report said Thursday, citing people familiar with the deliberations.
The ruble plunged shortly after Russia’s invasion of Ukraine in late February as Western countries imposed sanctions on Russia’s banking system. However, it has since risen nearly 40% against the dollar thanks to curbs on currency outflows and sharp interest rate hikes by the Russian central bank, as well as gains from energy exports.
One of Moscow’s concerns is that the currency may be too strong against the dollar and euro at the moment. Russian Finance Minister Anton Siuranov said in June that the Kremlin was ready to use its foreign exchange reserves to influence the exchange rate.
For years, Russia has focused its economic policy on building up its foreign exchange reserves, including dollars and euros. But it has been working to shift to other currencies since Western sanctions froze half of its $640 billion reserves.
According to Bloomberg, the plan’s presentation said, “In the new circumstances, accumulating liquid foreign exchange reserves for future crises is very difficult and not advisable.
The strategy also calls for Russia to begin selling its holdings of the yuan. The Turkish Lira, the South African Rand and the United Arab Emirates Dirham are considered other “friendly” currencies.
The Central Bank of Russia did not respond to an insider’s request for comment.
Moscow said in June it was working on a plan to develop a new international reserve currency, along with Brazil, India, China and South Africa, which have not imposed extensive sanctions on the Kremlin.
The ruble gained 0.83% on Thursday, taking the dollar to just over 60 rubles. China’s offshore yuan jumped after reports of Russia’s plans were reported, but was down 0.14% against the dollar at the last check.
read more: Russia wants to weaken the ruble through the purchase of ‘friendly’ currency