Russian Foreign-Exchange Demand Jumps 50% at OtkritieJason Corcoran and Anna Baraulina
Demand for foreign exchange at Russia’s Otkritie Bank surged by about 50 percent more than average last week after the ruble weakened to a record level versus the dollar, according to Artyom Zotov, the lender’s head of currency operations.
The ruble depreciated to more than 40 to the U.S. currency last week for the first time amid the continuing Ukraine conflict, which prompted Russia’s central bank to spend more than $3 billion to shore up its value just this month.
“Since the end of last week, when the dollar went for 40 rubles and the euro to 51, public demand for currency in cash and non-cash rose by about 50 percent compared to the average over the last week,” Zotov said by phone today. Otkritie, Russia’s 13th-largest bank by assets, hasn’t seen “excessive demand” or lines of customers like in March when Russia annexed Crimea, he said.
Russians have been moving savings out of the ruble as President Vladimir Putin’s standoff with the U.S. and its allies worsens over the Ukraine conflict and political sanctions. The share of deposits in foreign currencies rose to 19.4 percent in August from 17.4 percent in December, according to central bank data.
“Money is not fleeing Russia,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp., said in e-mailed comments. “They are just changing their denomination -- from rubles they become dollars -- and the main reason is expectations of further devaluation.”
The ruble recovered from a record low 41.0475 per dollar earlier today, advancing to 40.6670 by the 6 p.m. close in Moscow. The currency weakened 0.1 percent to 51.8855 per euro.
The Bank of Russia, which has said it plans to adopt a free float by next year, currently allows the currency to trade within a 9-ruble-wide corridor.
When the currency weakens past the boundary’s limit, the bank spends $350 million in defending it before it shifts the band by 5 kopeks in an effort to smooth the retreat, according to its guidelines. It repeats the process each time the currency depreciates by 5 kopeks. The size of interventions is typically released with a two-day lag on the central bank’s website.