In general, the mood for technical correction after excessive RUBUSD weakening last two weeks was well anticipated by many Fx analysts. As a rule, free floating assets are often traded with gaps: after short-term violent movements there usually comes a small pullback. Also at the heart of the correction is the decision on the interest rate of the Bank of Russia on Friday. Due to the sanctions, Russia’s financial sector remains largely self-closed and self-dependent, and an increase in the cost of borrowed money inevitable boosts the attractiveness of bank deposits, which contributes to the return to banks of funds from speculative operations – particularly in the real estate and crypto sectors. In fact, money supply, judging by the volume of overnight repo auctions, has critically plummeted in the process of the sharp weakening of the ruble in July. Playing the general game of ruble depreciation, banks gradually depleted available resources for their more customary operations – lending and improving capital structure in the face of deteriorating borrowers' creditworthinness.

It’s important to remember also, that most systemically important financial institutions in Russia no longer accept dollars and euros through ATMs. Some other second-tier banks have also closed that option, among which have been Otkritie, Moscow Credit Bank, Sovcombank, Rosselkhozbank, VTB, Promsvyazbank, Rosbank, Gazprombank and Alfa Bank. Russian banks have repeatedly stated that the restriction of currency transactions is a broad market-wide trend, as they are deprived of reliable investment options in foreign currencies due to the sanctions.

And last, but not the least: yesterday, on July 24, Vladimir Putin signed a law on the digital rouble (CBDC). The Russian digital rouble will be issued alongside the existing forms of money – cash and equivalents. Transactions with the digital ruble will be possible using a special platform operated by the Bank of Russia. The law will come into force on August 1, 2023.