Ruble Defense Cuts Russian Reserves by $15.7 Billion in WeekOlga Tanas and Vladimir Kuznetsov
Russia’s international reserves plunged the most in six years, losing $15.7 billion last week as the government and central bank pledged measures to support banks and defend the currency.
The value of the stockpile, which includes the central bank’s reserves and two sovereign wealth funds, fell to $398.9 billion in the week through Dec. 19, the Bank of Russia said today on its website. That is a 22 percent drop from January.
Policy makers, led by central bank Governor Elvira Nabiullina, are fighting to stem the ruble’s worst slump since the 1998 default. With oil prices and sanctions over the Ukraine conflict pushing Russia toward recession, the authorities have raised rates and sought to ease dollar demand. The steps have helped stem the currency rout, after the ruble collapsed to a record low 80 against the dollar last week.
“Such a sharp decline is clearly negative news for the ruble as such support is not really sustainable even in the medium term,” Vladimir Osakovskiy, the chief economist for Russia at Bank of America Corp. in Moscow, said by e-mail.
Russia sold about $4.8 billion in market interventions and provided $9.8 billion under foreign-currency repurchase agreements in the week through Dec. 19, according to central bank data. In the previous seven days, the reserves dropped $1.6 billion.
A revaluation also contributed to the contraction as the U.S. dollar strengthened against the euro, the central bank said in an e-mailed response to questions. Funds placed under foreign-currency repurchase agreements will be returned to the stockpile, according to the statement.
The pure monetary component of the central bank’s reserves has dropped to about $172 billion, or enough to cover 6.5 months of imports, which is “still very far from critical levels,” according to Osakovskiy.
The ruble lost about 27 percent against the dollar during the past three months, the worst performance among more than 170 currencies tracked by Bloomberg. The Russian currency strengthened 1.5 percent to 52.65 per dollar by 5:27 p.m. in Moscow.