Russia will increase foreign currency sales 830% as deadline for Eurobond repayment nears
Filip De Mott
Sep 6, 2023, 3:50 PM EDT
- Russia’s central bank said it will increase its foreign currency sales by 830% later this month.
- The sales will help Russia repay a $3 billion Eurobond that is due on September 16.
- The offloaded foreign currency will also help calm ruble volatility, the central bank said.
Russia’s central bank is planning to significantly accelerate foreign currencies sales to help repay a Eurobond that is coming due next week.
Between September 14 and 22, the Bank of Russia will sell 21.4 billion rubles worth of foreign currency a day into the domestic market, up 830% from a planned 2.3 billion. This will total 150 billion rubles worth of foreign currency, or $1.5 billion.
The FX adjustment comes as a $3 billion Eurobond will come due on September 16. Russia’s central bank said Wednesday that most holders will receive payments in rubles but acknowledged that some may seek payments in foreign currencies.
Last year, Russia missed a deadline to pay $100 million in interest on two foreign-currency bonds, marking the first time Moscow defaulted on its foreign debt since the Bolshevik Revolution more than a century ago.
While the Kremlin had the money to pay, sanctions blocked payments from moving through the global financial system.
Meanwhile, the central bank also said Wednesday that offloading foreign currencies into its domestic markets may also help calm ruble volatility.
Russia’s invasion of Ukraine has been detrimental to the ruble’s exchange rate, currently at around 98.4 against the dollar. That’s as Western sanctions, falling trade, and this summer’s Wagner uprising all put downside pressure on ruble demand.
The ruble fell to a 16-month low in August, plunging past the 100-per-greenback level. In response, Russia’s central bank lifted interest rates from 350 basis points to 12%, and announced plans to hold back on foreign exchange purchases through this year.
According to The Moscow Times, internal disputes have arisen in the past weeks amid Russia’s financial authorities, concerning further intervention. While the central bank’s governor Elvira Nabiullina is against it, Finance Minister Anton Siluanov has called for more restrictive capital controls.
Meanwhile, Russia may move to substitute all sovereign Eurobonds with replacement versions, given that Western sanctions limit it from servicing the debt.
“This is not the replacement of Eurobonds with OFZs, this is the replacement of Eurobonds with the same paper, with the same structure, pegged to foreign currency, but with all settlements in rubles,” a finance ministry official said, according to Reuters.
Source: Markets Insider
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