With the Ruble hitting record lows once again today against the USDollar, it appears concerns over USD liquidity are growing in Russia. The Russian central bank has unveiled an FX swap operation, allowing firms to borrow dollars in exchange for Rubles for a duration of 1 day (at a cost of 7%p.a.). Of course, this squeeze on USD funding – driven by Western sanctions – will, instead of isolating Russia, force Russian companies (finding USD transactions prohibitively expensive) into the CNY-axis, thus further strengthening the Yuanification of world trade and the ultimate demise of the USD as reserve currency.
USDRUB at record lows…
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And funding sanctions appear to have driven the Central Bank to supply USDollar liquidity into an apparently squeezed market…
As Bloomberg reports,
“Sanctions and closed access to foreign-exchange liquidity from the West†is feeding demand for dollars, Dmitry Polevoy, chief economist ING.
Foreign-exchange liquidity has “virtually dried out,â€Â with volumes sinking to about $100 million per day, compared with $1 billion to $2 billion previously, according to Natalia Orlova, the chief economist for OAO Alfa Bank in Moscow.
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Companies have $22 billion in dollar-denominated payments to make in September and local banks are “anticipating demand for hard currency from retailers and accumulating additional dollar liquidity,†Abdullaev said.
And as WSJ reports, the central bank has responded…
The Bank of Russia said Tuesday it introduced one-day currency swaps to aid banks “better management of the their short-term liquidity”.
Russian banks, unable to borrow abroad, are experiencing a shortage of currency liquidity.
“We see, naturally, some distortion on the (currency) swap market, which shows a structural deficit of dollars,” Russia’s Deputy Finance Minister Alexei Moiseev said Tuesday.
