Friday, October 31, 2008
Battle for the ruble
The Central Bank is using Russia’s international reserves to support the ruble
10–30–2008 – RBC News – The Central Bank of Russia reported a sharp decrease in Russia’s international reserves yesterday: from October 17 to 24 they dropped by $31 billion to $484.7 billion, largely due to the dollar’s appreciation against the euro and the British pound, as well as the Central Bank’s interventions on the forex market. Yesterday, however, the bank changed tack, saying it could withdraw its helping hand from banks that continue to build up foreign currency reserves. Russia’s international reserves have been declining over the past month, falling $31 billion from October 17 to 24 to $484.7 billion. According to Trust Bank’s analysts, the reserves shed some $10 billion due to the dollar’s strengthening against the euro and the British pound, shrinking by another $15 billion as a result of the Central Bank’s forex interventions. Stanislav Yarushevichyus, at ING Bank, also estimates the Central Bank’s interventions last week at between $12 billion and $15 billion. The rest seems to reflect the Central Bank’s allocations to Vnesheconombank for loans to banks and corporations, according to experts. Vnesheconombank Chairman Vladimir Dmitriyev announced yesterday that his bank was ready to invest about RUB 5 billion (approx. $185.2m) daily in the domestic stock market:”We plan to use the National Wealth Fund to diversify and support the Russian financial market. On average, we expect to receive about RUB 5 billion daily, and invest it.” The bank has already invested RUB 25 billion (approx. $925.9m), according to Prime TASS. The RTS index climbed 17.81 percent yesterday, reaching 758.71 points, and the MICEX jumped 19.46 percent to 727.39 points. Trading volumes were quite high on Thursday, especially in state companies’ stocks, according to Mikhail Molodov, at Kapital Investment Group: “Indeed, there were a lot of state funds on the market, due not only to Vnesheconombank, but also to VTB and Sberbank.” He said the market might decline at the end of the week as investors could be willing to take profits. At the same time, the Central Bank of Russia withdrew from currency swap operations yesterday, stopping providing banks with rubles for such operations. As a result, the ruble strengthened slightly against the dollar and the euro as banks had to sell foreign currency to buy rubles, analysts at MDM Bank say. ING Bank’s Yarushevichyus, however, argues that this restriction would not affect speculators as there is enough ruble liquidity on the market currently, with interbank borrowing rates standing at 4-5 percent. A more effective measure against speculators betting on a weak ruble could be refinancing restrictions for banks that continue to build up their foreign currency reserves. The Central Bank published a letter yesterday on the monitoring of foreign currency assets of credit organizations, in which it recommended that in November and December banks should not increase their balances of foreign currency as accumulated in the period from August 1 to October 25. “Compliance with this recommendation will be considered by the Central Bank when deciding on limits on the participation of credit organizations in the Central Bank’s auctions for collateral-free loans,” the document says.
10–30–2008 – RBC News – The Central Bank of Russia reported a sharp decrease in Russia’s international reserves yesterday: from October 17 to 24 they dropped by $31 billion to $484.7 billion, largely due to the dollar’s appreciation against the euro and the British pound, as well as the Central Bank’s interventions on the forex market. Yesterday, however, the bank changed tack, saying it could withdraw its helping hand from banks that continue to build up foreign currency reserves. Russia’s international reserves have been declining over the past month, falling $31 billion from October 17 to 24 to $484.7 billion. According to Trust Bank’s analysts, the reserves shed some $10 billion due to the dollar’s strengthening against the euro and the British pound, shrinking by another $15 billion as a result of the Central Bank’s forex interventions. Stanislav Yarushevichyus, at ING Bank, also estimates the Central Bank’s interventions last week at between $12 billion and $15 billion. The rest seems to reflect the Central Bank’s allocations to Vnesheconombank for loans to banks and corporations, according to experts. Vnesheconombank Chairman Vladimir Dmitriyev announced yesterday that his bank was ready to invest about RUB 5 billion (approx. $185.2m) daily in the domestic stock market:”We plan to use the National Wealth Fund to diversify and support the Russian financial market. On average, we expect to receive about RUB 5 billion daily, and invest it.” The bank has already invested RUB 25 billion (approx. $925.9m), according to Prime TASS. The RTS index climbed 17.81 percent yesterday, reaching 758.71 points, and the MICEX jumped 19.46 percent to 727.39 points. Trading volumes were quite high on Thursday, especially in state companies’ stocks, according to Mikhail Molodov, at Kapital Investment Group: “Indeed, there were a lot of state funds on the market, due not only to Vnesheconombank, but also to VTB and Sberbank.” He said the market might decline at the end of the week as investors could be willing to take profits. At the same time, the Central Bank of Russia withdrew from currency swap operations yesterday, stopping providing banks with rubles for such operations. As a result, the ruble strengthened slightly against the dollar and the euro as banks had to sell foreign currency to buy rubles, analysts at MDM Bank say. ING Bank’s Yarushevichyus, however, argues that this restriction would not affect speculators as there is enough ruble liquidity on the market currently, with interbank borrowing rates standing at 4-5 percent. A more effective measure against speculators betting on a weak ruble could be refinancing restrictions for banks that continue to build up their foreign currency reserves. The Central Bank published a letter yesterday on the monitoring of foreign currency assets of credit organizations, in which it recommended that in November and December banks should not increase their balances of foreign currency as accumulated in the period from August 1 to October 25. “Compliance with this recommendation will be considered by the Central Bank when deciding on limits on the participation of credit organizations in the Central Bank’s auctions for collateral-free loans,” the document says.
# posted by Deval : 8:08 AM
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