2023-07-04 21:00:00
Russian citizens increase foreign currency cash holdings, RMB foreign currency deposits soaring
“De-ruble” is progressing in Russia (Photo: Abaca/Aflo)
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As the ruble depreciates, more and more Russians are holding foreign currency in cash or deposits.
Foreign currency deposits in the renminbi and holdings of dollars and euros via the Turkish lira are the main channels.
Russia continues to invade Ukraine. “De-Rubleization” is one phenomenon that indicates the destabilization of society.
(Yosuke Tsuchida: Deputy Chief Researcher, Mitsubishi UFJ Research & Consulting)
On June 23, the private military company Wagner launched an armed uprising in the Rostov region of southern Russia. The company’s leader, Evgeny Prigozhin, marched his troops 200 kilometers to Moscow, the capital of Russia. is what happened.
Russia’s Federal Security Service (FSB) has launched an investigation into Mr. Prigozhin for calling for a rebellion, while Mr. Prigozhin is said to be in Belarus under the protection of President Lukashenko.
In any case, Russia’s political situation appears to be steadily destabilizing following the prolonged war with Ukraine. Wagner’s armed uprising was a perfect example of this.
Such political instability is inextricably linked to rising social unrest. The fact that social unrest is actually spreading in Russia can be seen from the movement of household cash and deposits.
Looking at the “Financial Assets and Liabilities Statistics” of the household sector released by the Russian Central Bank, the ratio of foreign currencies to cash and deposits stood at 26.5% as of May 1, rising for seven consecutive months (Chart 1).
[Chart 1 Percentage of foreign currencies in cash and deposits]
(Source) Central Bank of Russia
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In February and March last year, when Russia invaded Ukraine, the share of foreign currency in cash deposits soared due to the impact of the crash of the ruble currency. Since then, the ruble has experienced a “V-shaped recovery,” but it has continued to decline since the beginning of this year, and is still below the level before the invasion of Ukraine.
Such weakness of the ruble is probably causing the Russian public to move away from the ruble.
More notably, the share of foreign currency in cash rather than in deposits has soared. This move proves that the Russian people want to hold foreign currency in cash (banknotes) rather than deposits.
Bearing in mind that restrictions on withdrawals from foreign currency deposits will be tightened, it seems that Russian citizens are increasing their holdings of foreign banknotes in order to protect their assets.
So, which foreign banknotes, such as the US dollar or the euro, are Russians increasing their holdings of?
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