Foreigners stopped buying currency in Russia after new US sanctions

Impact of recent US sanctionson the Russian government debt turned out to be minimal, although the share of non-residents in OFZ continued to decline, the Central Bank said. After the announcement of sanctions, foreigners returned to buying rubles for the first time since autumn

The latest US sanctions against RUSSIA, which affected the primary market of Russian government debt, apparently turned out to be softer than expected and led to the fact that non-residents stopped buying foreign currency on the Russian foreign exchange market, the Bank of Russia said in a review of financial market risks.

In April, for the first time since November 2020, non-residents became net sellers of foreign currency (they sold more of it than they bought). “The main sales began after the announcement of the sanctions. From April 15 to the end of the month, foreign participants sold foreign currency on the domestic market for 63 billion rubles,” the Central Bank said.

Foreign investors mainly buy foreign currency on the Russian market by selling ruble-denominated assets, often federal loan bonds (OFZ). And vice versa, they sell foreign currency and buy rubles in order to invest in local securities. On April 15, the US authorities announced a ban on US investors from purchasing new OFZ issues after June 14, 2021. But the sanctions did not provide for more stringent restrictions, such as a ban on the purchase of secondary public debt by foreigners. The ruble, which in April - before the imposition of sanctions - traded in the region of 75.5-77 rubles. per DOLLAR, after their adoption it gradually strengthened - by May 13, the American currency costs less than 74 rubles.

The share of foreigners in the state debt of Russia fell to the level of six years ago

Against the background of the expectation of new sanctions, OFZ yields grew in April, the Central Bank noted, but within a week after the announcement of sanctions, the yield even slightly decreased.