Russian exchange bureaux run out of dollars

By bne IntelliNews October 10, 2014

bne -


With the ruble continuing its slide against the dollar, as companies hoard hard currency to pay down foreign debt, analysts are waiting for the next bad thing to happen: individuals making a rush to buy dollars.

According to business daily Vedomosti, the next step in the ongoing ruble meltdown may be starting, with eight out of 30 Moscow currency exchange booths visited lacking any more dollars to sell after demand leapt since the start of the week.

"Demand for dollars has leapt by 10-15% over the last week and a half,” Anton Ivanov, head of SB Bank's department of retail currency sales told Vedomosti. "We could probably sell more but don’t want to have such large stocks of cash stored on the premises," he added. An employee at Lanta Bank told Vedomosti that demand for dollars was at two to three times over the average on September 9. 

Such a spike in dollar demand mostly affects small banks, with Sberbank saying that demand for dollars has been stable over the year, with the exception of days in March when Russia launched its annexation of Ukraine's Crimea, according to Vedomosti. Small banks specialising in operations such as changing money offer better exchange rates than the larger banks and thus are more sensitive towards shifts in demand, say analysts.

Macro analysts forsee demand for dollar cash on the part of the population in fact dropping in September, from a $10.3bn net demand spike in the first quarter, sparked by the Ukrainian Crimean crisis, to only $1.5bn net dollar cash purchase in in the second quarter, according to VTB Capital analysts. "By the end of September people were not in the mood to buy dollars in a rush," said VTB Capital.

But the rush may have now begun. "Feverish demand from the average Russian for foreign currency is the biggest challenge ahead for the ruble, and we believe that it would be a red button for the CBR to draw a hard line for the Russian currency, should this risk start to materialise," VTB Capital analysts warned.

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