In recent months, foreign investors have stepped up their activity in foreign exchange transactions (buying rubles against foreign currency guarantees) – suggesting that this tool is becoming the most popular way for foreigners to participate in the Russian financial market. Bank of Russia financial market risk review. In October, foreigners actively put rubles in exchange. In a matter of months, the net position reached $ 30 billion (a short position in foreign currency) – a record high, according to the Central Bank.
The interest of foreign participants in the currency exchange market is fueled by rising interest rate differences as a result of the Central Bank’s rising main rate, as well as the readiness of systematically important credit institutions (SICOs) due to the high liquidity of accumulated foreign exchange. profits in exchange for exporters. The difference in the interest rates of a pair of currencies makes it possible for a non-resident to receive income by buying rubles and selling it at a more expensive rate a little later.
In October, systematically important banks sold 236 billion rubles in exchange for rubles. at the box office and in exchange. Foreigners bought 190.4 billion rubles and foreign bank subsidiaries – 57.5 billion rubles. In September, the size of buying and selling foreign currency was higher – banks put foreign exchange at 403 billion rubles, and non-residents bought 428 billion rubles.
At the same time, non-residents and foreign-subsidized banks increased their purchases of foreign exchange in the domestic foreign exchange market: they bought 93 billion in October against 18 billion rubles. in September. Partly due to the conversion of rubles received after the sale of Russian shares. But since the beginning of 2021, the outflow of foreign participants from Russian shares has been about $ 4.5 billion, while the inflow of currency exchanges has been $ 23 billion.
On the one hand, the active participation of non-residents in currency exchanges poses a risk of their sharp exit, as more than 90% of transactions are made in the short term – “day to night” (day) and “week”, wrote the Central Bank. . On the other hand, the Russian SZKOs provide non-residents with liquidity of foreign currency accumulated in their accounts, mainly received from exporters. At the same time, SZKOs receive rubles to manage liquidity. If non-residents are not actively interested in currency exchange transactions, then Russian banks may have trouble attracting foreign currency liquidity and attracting ruble liquidity, the Central Bank writes.
The growing interest in the currency exchange means the popularity of the carry trade strategy – its essence is to borrow in the currencies of developed countries, where interest rates are lower, and to invest in instruments that are more profitable in the currencies of emerging economies. To implement the carry trade strategy through currency exchanges, non-residents “buy” the currency in the first “leg”, distributing rubles, and the second “leg” is the reverse operation: non-residents “sell” and receive the currency. rubles. In most cases, transactions are made “overnight” and close in the financial market with greater volatility.
In October, the ruble was valued at 2.4% against the dollar at the end of a trade of 70.95 rubles / $ 29. At the close of trading on November 1, the dollar rose to 71.56 rubles.
Since the beginning of the year, the ruble has shown a yield of 10.6% among the 24 currencies in the rising market (the dollar as a financing currency), calculated Mikhail Shulgin, head of the global research department Otkritie Investments. Only the Argentine peso (+ 18.6%) has a better result, but in terms of risk Argentina is lower than Russia in many basic indicators.
For rail trading, investors use the least risky strategies, among which swap remains the most appropriate tool: due to currency liquidity, a foreign participant must convert currency at an increased rate in Russia, but in the case of swap, conversion yes. It is not necessary – it is enough to sell the tool, says Nikita Silkin, head of the Internet broker “BCS World of Investments”.
In October, the Central Bank raised its key rate by 0.75 percentage points, which was unexpected for the market. Up to 7.5% and high inflation rates led to additional volatility in the ruble market, says Sova Capital chief trader Yaroslav Vishnyakov, who began to implement further key rate hikes, which led to large sales. OFZ market. “In such strong movements, many market participants prefer to hedge their risk, and within a one-year horizon, this can be done through currency exchanges,” says Vishnyakov.