Currency's demand plummets to unprecedented lows
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Hey there! Let's dive into the latest financial happenings in Russia. Companies have been curbing their currency spending recently, with a total purchase of 1.8 trillion rubles in April. This figure represents a noticeable drop compared to the average monthly expenditure of 2.5 trillion rubles in Q1 2025.
According to experts like Dmitry Tselischev, Managing Director of "Rikom-Trust" Investment Company, the decrease could be due to the prolonged strengthening of the ruble and the restrictive conditions some credit organizations impose on withdrawing currency abroad, even for their own accounts or payments of goods/services.
Individuals have also scaled back their foreign currency demand, purchasing 68.5 billion rubles in April, compared to 88.2 billion rubles in March. Analysts earlier predicted a traditional increase in demand for yuan, euros, and dollars ahead of the May holidays.
Interestingly, the spreads for buying and selling cash foreign currency changed in different directions. The average spread for US dollar operations decreased from 2.99 to 2.73 rubles, while for euro operations, it increased from 2.90 to 3.17 rubles. Dmitry Tselischev attributes this difference to the weakening of the dollar against the euro, as well as the reduced volume of available cash currency and the limited number of banks operating with euros, creating a scarcity and increasing spreads.
Major exporters sold $10.0 billion in currency revenue in April, a 2% decrease from the previous month's level. The Bank of Russia attributes this to the continuing downward trend in oil prices on the world markets. Intriguingly, the ratio of net currency sales to export revenue by major exporters in February 2025 was 99%, with a high of 115% reached in June 2024 when many companies were accumulating rubles for dividend payments.
The Review published by the Central Bank highlights the divergent dynamics of corporate bonds based on their credit risk. Bonds rated "AAA" witnessed a 15 basis point increase in yields, while those rated "AA" and "A" dropped by 15 and 60 basis points, respectively, and "BBB"-rated bonds fell by 104 basis points. Bond yields are inversely proportional to their price.
From February 13 to March 20, there was a significant rally in the OFZ market, leading to a nearly 10% increase in the MOEX Index of government bonds. This was primarily driven by expectations of geopolitical thaw. Large and institutional long-term investors favored highly-rated government bonds and high-quality corporate bonds initially, but subsequently shifted attention to bonds from lower tiers whose yields significantly exceeded those of similar maturity government bonds.
Alexei Antonov, Head of Investment Consulting at Alor Broker, explains that the top performers in 2025 have been state OFZs and corporate bonds issued by the most reliable borrowers with an 'AAA' rating. Securities with lower ratings have experienced a decline in yield dynamics due to reduced investor demand, primarily due to the high key rate of the Central Bank and the risks of potential default and/or restructuring of debt obligations by certain companies.
In conclusion, the demand for foreign currency purchases by corporate clients has decreased due to factors like the strengthening ruble, exporters' repatriation of earnings, and high interest rates and tightened lending. It's a dynamic financial landscape, so keep an eye on these trends!
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- In light of the decreased foreign currency demand by both companies and individuals, it might be an appropriate time for individuals to focus more on personal-finance strategies and potentially consider investing in the Russian financial market for potential growth.
- With the ongoing strengthening of the ruble and the divergent dynamics of corporate bonds based on credit risk, meaningful opportunities could present themselves for businesses in the finance industry, particularly in areas such as investing and long-term investing.
