Russia’s Finance Ministry will buy about $4.5 billion in foreign currency over the next three weeks, increasing purchases after changes aimed at further limiting the economy’s dependence on oil.

The amount of additional budget revenue earned in January from oil and gas is expected at 257.1 billion rubles ($4.5 billion) as a result of higher crude prices, the Finance Ministry said on Wednesday. Under a so-called budget rule, the entire windfall will be spent on buying foreign currency in the domestic market, with daily purchases at 15.1 billion rubles from Jan. 15 to Feb. 1, it said in a statement.

The operations will help insulate the economy from the ups and downs in crude and shield the ruble’s exchange rate from volatility. The government is absorbing all revenue earned when Russia’s Urals export blend is above $40 a barrel, channeling the excess income into its sovereign wealth fund.

Eoin Treacy's view

The Ruble accelerated to an important low in early 2015 which prompted the central bank to intervene and to push interest rates up to 17%. The collapse in oil prices into the 2016 low saw the currency hit a nadir but the interest rate and oil’s recovery resulted in a major short covering rally.

The rates spend much of 2017 ranging, in line with many commodity related markets, and it is now testing the upper side of that congestion area. 

The Russian Traded Index broke upwards this week from a yearlong trading range and a sustained move below 1600 would be required to question recovery potential.

It is also worth highlighting Sberbank which is often considered a barometer for risk appetite among global investors. The share completed an eight-year range in 2016 and continues to extend its steep advance. A sustained move below the trend mean would be required to question the consistency of the uptrend.