The WSJ has reported that The Bank of Russia stated late Monday that it opposes any restrictions on using foreign currencies within Russia, addressing earlier calls from the country’s security council.
It what looks like a non win-win to the international community, the inter-agencies commission of the Security Council of Russia had told the central bank and the government to work on boosting the ruble’s role in international payments, while limiting the usage of foreign currencies “on the territory of the Russian Federation.” However, as stated, the Bank of Russia is concerned by this policy.
“The Bank of Russia assumes that such restrictive measures are inadvisable,” the Bank of Russia said in an emailed comment shortly before midnight.
The idea of using the ruble in international trade was put forward a decade ago and gained more support after 2008 when Russia floated the idea of turning Moscow into a global financial center. Russia has long wanted to boost the ruble’s image as a currency for international trade and a potential reserve currency, alongside the U.S. dollar, the euro and the British pound.
After Western sanctions that followed Moscow’s annexation of Crimea more than a year ago, Russia’s government vowed it would soon find ways to prompt export-focused companies to switch to rubles from dollars in their international trade. Trading the ruble against the Chinese yuan directly was also seen as the main alternative to the greenback.
The idea of the ruble becoming a more widely adopted international currency has it limits due to the very nature of Russian geopolitics at the moment. However, one positive sign out of the distress sanctions took out on the ruble was the Russian central bank finally decided to let go of the managed currency apparatus and allowed the currency to freely float quicker than planned. The free float can be seen as a positive sign and is one of the main road blocks on the path towards a true market rate currency where fundamentals dictate relative value.
Check out the latest one year chart of USD/RUB where the currency looks to have found it’s comfort zone around the 50 handle after a mini ruble currency crisis to begin the year. Now speaking year-to-date the ruble is one of the best performing currencies against the dollar in 2015. It’s safe to say for now things have calmed down within Russian FX markets as they continue to hone monetary policy.