Russia to increase daily forex sales in coming month

By Alexander Marrow and Darya Korsunskaya

(Reuters) -Russia's finance ministry will increase daily foreign currency sales to the equivalent of 3.6 billion roubles ($44.3 million) a day between June 7 and July 6, it said on Monday, far exceeding analyst forecasts as it compensates for reduced fuel revenues.

After a hiatus of several months, Russia resumed foreign currency interventions in January, selling yuan rather than what it terms "unfriendly" Western currencies, underscoring the growing importance of China's currency as Moscow seeks to ensure economic stability in the face of Western sanctions.

The finance ministry said its regular FX sales on the market would total 74.6 billion roubles over the coming month. Analysts surveyed by Reuters had predicted sales would total 20 billion roubles.

In the previous period, between May 10 and June 6, the ministry had planned to sell foreign currency worth 40.4 billion roubles to compensate for lower oil and gas revenues.

The government carries out forex interventions to cover shortfalls - or build up reserves in the event of a surplus - in earnings from Russia's vital oil and gas exports, revenues from which have shrunk this year due to Western sanctions.

The central bank sold almost 450 billion roubles' worth of yuan and gold from the National Wealth Fund (NWF) on the finance ministry's behalf between January and May.

The finance ministry said May's oil and gas revenues were 30.6 billion roubles below plan. It said it expected a 44-billion-rouble shortfall from federal energy revenues in June.

Reduced revenues and soaring spending pushed Russia's Jan-April budget deficit to almost $44 billion, already 17% higher than the target for all of 2023, creating fiscal pressure as Moscow continues its military offensive in Ukraine.

The ministry had been reducing its monthly forex sales, and analysts had been waiting for it to begin buying rather than selling. Forecasting volumes is complicated by a lack of information on oil production dynamics.

"A regime switch from selling yuan to (large-scale) FX purchases would be significant," Rosbank analysts said. The ministry's foreign exchange operations help Russian banks maintain yuan liquidity, Rosbank said.

($1 = 81.2075 roubles)

(Reporting by Darya Korsunskaya and Alexander Marrow; Editing by Toby Chopra, Sharon Singleton and Barbara Lewis)