Russian exporters restricted foreign currency sales in early April, contributing to a significant depreciation of the Russian ruble, the central bank said on Monday.
The Russian currency declined more than 5% last week to reach its lowest level in almost a year.
After spending most of last year as the world’s best-performing currency, the ruble took a major hit after the West imposed fresh sanctions on Moscow’s main oil exports in the form of a cap on oil prices and an EU embargo on Russian oil exports by sea had been imposed late last year.
“There has been a temporary drop in the sale of foreign exchange earnings by exporters, leading to an acceleration of the ruble’s depreciation in early April,” the bank said in a surveillance report released on Monday.
Russian exporters are expected to convert part of their foreign exchange earnings into rubles to pay taxes at the month’s end and comply with Russia’s strict capital controls.
The solution to the decline in Russia’s currency
The central bank said Russian companies and individuals have answered to the ruble’s collapse by boosting their foreign currency sales.
The bank also said it saw a significant surge in interest in the Chinese yuan – which is challenging the US dollar as Russia’s main foreign currency – when the Russians bought rubles for 41.9 billion yuan in March, compared with 11.6 billion yuan in February.
The bank said transactions in the yuan accounted for 39% of the total volume in the Russian foreign exchange markets, compared to 34% for the ruble-dollar currency pair.
Moreover, the United States and European Union have ordained sanctions to block Russia’s access to dollars and euros, including banning several major banks from the SWIFT financial communications network, after Moscow deployed tens of thousands of military to Ukraine in February.
Moscow, however, has switched to the Chinese currency and is encouraging businesses and individuals to abandon Russia’s longstanding reliance on the US dollar as a foreign currency.