Over the years, the foreign exchange market in Russia has reflected the general development of the Russian economy and its increasing participation in the world economy. The government of Russia introduced ruble convertibility with an eye toward transition of the country’s economy into a market economy. Russia’s foreign exchange rate has changed from multiple exchange rates, to managed floating, to soft peg.
The Russian foreign exchange market underwent major changes with price liberalizations in 1992, and as a result of that the ruble became a genuine and important currency. The dollar is also an important medium of exchange in Russia, but the ruble has not been sidelined.
Hard currency can be held in Russia, and a common practice among the Russian people is to convert the rubles in their possession into dollars and vice versa.
In 1989, the Soviet Union introduced flexibility in exchange rates. The allocation of foreign exchange was done through auctions.
In 1991, the Central Bank of Russia created the first currency exchange in the country, and in the following year, it was renamed the Moscow Interbank Currency Exchange (MICEX). This entity carries out foreign currency trading in Russia.
The Russian foreign exchange market is controlled by the Central Bank of Russia. It issues special licenses to commercial banks and thus controls the internal foreign exchange turnover.
There are two kinds of licenses.
One gives authorized commercial banks the right to trade in foreign currency both internally and externally. Banks buy foreign currency from exporters and sell them to importers.
The Russian foreign exchange market is mostly centralized.
The major currencies traded in the foreign exchange market Russia include the dollar, the Euro, and the Japanese yen.
The Russian foreign exchange market is one of the financial markets that have made their mark in the Russia economy. What started as a spot market has now expanded into spot, futures, and forward markets.