In September 2024, individuals sold eight times more foreign currency than they bought in August of the previous year, according to the Bank of Russia’s overview of financial market risks. While individuals sold almost RUB 7 billion ($72 mln) worth of foreign currency in August 2023, this figure skyrocketed to RUB 55 billion ($565 bln) in September of this year. Why are Russians getting rid of their foreign currency?
The Central Bank does not specify which currencies are the most common to be sold. However, given that the statistics refer to sales by the public, it is likely that these are dollars and euros. These currencies are still in demand for foreign travel and have traditionally been seen as a way to protect savings from inflation. But with a high key rate (currently at 19%), the situation has changed.
The mass sale of foreign currency by individual customers to banks worth RUB 55 billion is primarily due to the gradual depreciation of the dollars and euros that people keep both in bank accounts and in cash savings, as their yield does not even reach 1% per year, explains Artem Deev, head of the analytical department at AMarkets. At the same time, it is possible to earn up to 20% per annum or even more in rubles, and up to 6.5% in yuan (for the sake of currency diversification), which is twice as high as even in China.
“Why is this happening now? The key rate has been raised again to 19%, which means that deposits may well offset rising inflation, given that the Central Bank is clearly not going to ease its monetary policy in the coming months,” the expert notes. “If earlier dollars and euros could be used for payments and profitably invested in Russia, now the so-called ‘unfriendly’ currencies may come in handy for vacations or for large purchases abroad (for example, real estate). It has finally become obvious that the trend of dividing currencies into friendly and unfriendly ones will stay with us for the foreseeable future.”