Fate of dollar in Russia revealed

The Bank of Russia will extend restrictions on cash withdrawals of foreign currency, but says the dollar will continue to circulate

The Central Bank of Russia plans to extend restrictions on cash withdrawals in US dollars and euros in September, Governor Elvira Nabiullina said at a press conference on Friday. She noted that the decision was prompted by EU and US sanctions banning the import of the banknotes of their respective currencies to Russia.

Unfortunately, we now have no reason to expect the situation with foreign currency to change for the better in the future… Therefore, in September we will be forced to extend the restrictions that were introduced in early March,” Nabiullina added.

She noted, however, that even in the worst-case scenario, the circulation of foreign currency in Russia would continue.

Even in the most apocalyptic scenario, in the most difficult scenario, cash dollars will circulate in our country. According to our estimates, the population has only about $85 billion in foreign currency cash, both in dollars and euros. Now banks can sell and buy this currency, so the circulation of cash will continue,” she stated.

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On March 9, the regulator established temporary restrictions for cash operations with euros and dollars, which were to be in place until September 9. According to the curbs, no more than $10,000 in cash (or the equivalent in euros) can be withdrawn from a foreign currency account. Amounts over this limit can be withdrawn only in rubles at the prevailing central bank exchange rate. However, Nabiullina noted in her speech that 90% of all foreign currency deposits in Russia do not exceed $10,000.

Earlier, the Ministry of Economic Development drafted a bill that allows Russian banks to apply negative rates on foreign currency deposits held by corporate customers. The measure is aimed at dedollarizing the Russian economy, the Central Bank said.

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