Exporters increasing forex sales main factor behind ruble strengthening in Oct - Russian Central Bank
MOSCOW. Nov 10 (Interfax) - Exporters boosting sales of foreign currency in order to fulfill increased tax obligations absent the Central Bank of Russia (CBR) purchasing foreign currency under the fiscal rule was the main factor behind the ruble strengthening in October, the CBR said in its published review of financial market risks.
The largest exporters increased the volume of net forex sales to $12.5 billion in October from $9.2 billion in September and $7.2 billion in August. The bulk of sales occurred in the second half of the month, with the average daily sales volume surging to $717 million from $388 million in the first half of the month owing to the calendar effect. The volume of sales is always higher in the second half of the month than it is in the first half of the month because of the tax period. The requirements of the recent presidential decree, which mandates the sale of foreign currency earnings by exporters, have also affected the forex volumes.
Increased oil prices, with the price of Brent rising around 10% in September, have affected growth in the volume of foreign exchange earnings, and the volume of net forex sales in the second half of the month results from exporters being required to remit significant tax payments, the CBR notes.
Hiking the key rate to 15% per annum has also facilitated the strengthening of the ruble, the regulator notes. "Higher rates lead to curbing demand for ruble loans, including to pay taxes, which encourages exporters to intensify forex sales, as well as to increasing the attractiveness of ruble savings," the CBR emphasizes.
The devaluation process of banking sector balance sheets has continued under these conditions. The foreign currency assets of banks dropped $3.2 billion in October, and foreign currency liabilities fell $3 billion according to preliminary estimates.