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I read in Russian article that Russian CB can't influence on dollar. CB can't depreciate dollar. CB can influence on rate of RUB only. But if there is demand on USD or RUB then why can't CB influence on USD?

Why can't Russian CB influence on dollar?

Thanks.

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1 Answer 1

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Any foreign central bank can influence the dollar, but the extent of this influence depends on the amount of dollar reserves it intends to sell or buy.

Any country's central bank can start selling its USD reserves, trying to weaken the dollar. However, dollar demand is so strong worldwide, that the amount of reserves being sold would have to be unrealistically high to have any meaningful impact on the strength of the dollar in the world economy.

Assuming USD demand is constant, no individual CB has enough reserves to meaningfully depreciate the US dollar.

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    $\begingroup$ If you're referring to strengthening RUB, that could be attributed to Russia's gas sales in rubles. All foreign energy buyers must convert their USD into RUB before the purchase. This increases demand for RUB, strengthening the exchange rate. Take a look at the FX rate starting in March 2022 when this decree was announced: you can see how quickly this massive demand for RUB strengthened the exchange rate. $\endgroup$
    – A. Shultz
    Commented May 30 at 2:29
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    $\begingroup$ The Russian dollars have also been frozen or confiscated by the Western banks where they are actually held, so the Russian central bank can't sell them even if it wants to. $\endgroup$ Commented May 30 at 10:49
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    $\begingroup$ @Mike_bb if RUB strengthens, then USD depreciates relative to the RUB, yes. But RUB is a pretty niche currency to begin with, so it did not impact the strength of the USD relative to other currencies. $\endgroup$
    – A. Shultz
    Commented May 31 at 2:33
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    $\begingroup$ By the amount of international trade done in that currency and gdp of countries using that currency. $\endgroup$
    – A. Shultz
    Commented May 31 at 15:00
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    $\begingroup$ @Mike_bb gdp growth increases demand for currency domestically (need to facilitate more transactions) and internationally (investment inflows from abroad, chasing growth) $\endgroup$
    – A. Shultz
    Commented Jun 17 at 5:23

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