The ruble’s world-beating rally is enabling Russia to do something it wouldn’t have thought possible a few months ago: Rebuild currency reserves that slumped $120 billion in less than a year.
The Bank of Russia said on Thursday it would buy $100 million to $200 million a day in the market to replenish its cash pile, which tumbled to as low as $351 billion in April, the lowest since at least 2008.
The reserves started falling in July last year as policy makers sought to defend a currency weighed down by U.S. and European sanctions over the conflict in Ukraine.
In total, Russia spent almost $90 billion on interventions in 2014 before abandoning its managed exchange-rate policy in November as plunging oil prices exacerbated the ruble’s 46 percent retreat against the dollar.
The currency rebounded 21 percent this year amid a 17 percent jump in Brent crude and as a cease-fire in eastern Ukraine reduced the likelihood that sanctions will be deepened.
“This is a window of opportunity for the central bank to step in and replenish some of its reserves,” Neil Shearing, the chief emerging-market economist at Capital Economics Ltd. in London, said by phone on Thursday.
“They will take advantage of points where the ruble is strong and the dollar is weak.”
By selling rubles, the central bank isn’t only shoring up its reserves, it’s also helping curb an appreciation that has curtailed export earnings in local-currency terms.
Data today will probably show Russia’s budget deficit widened to 1 trillion rubles ($20 billion) in the first four months, compared with a surplus at the same time last year. The currency weakened as much as 2.7 percent against the dollar on Thursday.
bloomberg.com
The Bank of Russia said on Thursday it would buy $100 million to $200 million a day in the market to replenish its cash pile, which tumbled to as low as $351 billion in April, the lowest since at least 2008.
The reserves started falling in July last year as policy makers sought to defend a currency weighed down by U.S. and European sanctions over the conflict in Ukraine.
In total, Russia spent almost $90 billion on interventions in 2014 before abandoning its managed exchange-rate policy in November as plunging oil prices exacerbated the ruble’s 46 percent retreat against the dollar.
The currency rebounded 21 percent this year amid a 17 percent jump in Brent crude and as a cease-fire in eastern Ukraine reduced the likelihood that sanctions will be deepened.
“This is a window of opportunity for the central bank to step in and replenish some of its reserves,” Neil Shearing, the chief emerging-market economist at Capital Economics Ltd. in London, said by phone on Thursday.
“They will take advantage of points where the ruble is strong and the dollar is weak.”
By selling rubles, the central bank isn’t only shoring up its reserves, it’s also helping curb an appreciation that has curtailed export earnings in local-currency terms.
Data today will probably show Russia’s budget deficit widened to 1 trillion rubles ($20 billion) in the first four months, compared with a surplus at the same time last year. The currency weakened as much as 2.7 percent against the dollar on Thursday.
bloomberg.com
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