Central Bank of Russia (CBR) on Thursday announced the launch of dollar purchases in conjunction with Russia's FinMin to shield the economy from oil swings. The aim is to increase the stability and predictability of internal economic conditions and to lower the impact of the volatile energy market on the Russian economy and public finances, the CBR said.

According to a new scheme, Central Bank of Russia will buy dollars when the oil price is trading above $40/bbl (which is the 2017 budget assumption), and sell dollars when the oil price is below this level. The volume of purchases per month will be a modest $1-2bn only, which is neither likely to alter the currency's underlying trend nor add significantly to CBR reserves.

Russia's central bank said on Thursday it did not expect market players to speculate on the rouble in response to the finance ministry's decision to start buying forex next month, Interfax news agency reported. CBR will begin actual purchases only beginning February, but the market has begun to discount the outcome in advance. RUB was a notable underperformer yesterday despite a sharp rally in the oil price.

An economic recovery and low inflation mean the Russian central bank could ease monetary policy, but there are risks from hurried decisions on cutting rates, central bank official Igor Dmitriev said on Tuesday. At its first monetary policy meeting for 2017 on Friday, February 3, CBR is widely expected to maintain its interest rate at 10 percent as the country’s inflation remained a bigger concern.

"For the moment, the launch of this scheme does not change our fundamental USD-RUB outlook: we forecast USD-RUB to rise gently to 61.00 by mid-2017," said Commerzbank in a report.