Russian Pause in Dollar Purchases Helps to End Ruble’s TumbleKsenia Galouchko
The Bank of Russia paused foreign-currency purchases for the first time since it started interventions last month, helping to arrest a slump in the ruble.
Officials didn’t buy or sell foreign currency on June 5, according to data released Tuesday. The currency gained 0.5 percent to 55.704 against the dollar by 5:44 p.m. in Moscow, strengthening for a third day.
Russia has damped this year’s biggest major-currency rally, with the ruble tumbling 15 percent since its interventions. Any further depreciation risks stoking inflation and threatening policy makers’ efforts to reduce borrowing costs.
“It seems that the central bank decided that it has done enough, at least for now, in terms of foreign-currency interventions,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank, said by e-mail. “The Bank of Russia is likely to be flexible when it comes to buying hard currencies to rebuild its reserves.”
Bank of Russia Governor Elvira Nabiullina said June 4 she plans to purchase foreign currencies to boost reserves to $500 billion in coming years, after adding $3.2 billion since May 13.
The ruble is under pressure from an escalation in fighting in eastern Ukraine along with statements by U.S. and European Union officials that sanctions against Russia will be extended. The currency slid 7 percent last week, the most since January.
“The Bank of Russia has probably stopped its interventions for now as the ruble has reached the level of 55 against the dollar which seems like a fair value considering the current oil price,” Alexei Egorov, an analyst at PAO Promsvyazbank in Moscow, said by phone. “We shouldn’t count on the ruble returning to 50, it’ll fluctuate around 55.” Brent crude jumped 3.6 percent to $64.95 a barrel.
The Bank of Russia didn’t buy dollars on June 5 because of a surge in volatility since interventions could have strengthened “negative trends” of such a market environment, the central bank press service said in an e-mailed comment. The Bank of Russia reiterated that it would minimize the effect of replenishing international reserves on the exchange rate by adjusting the volume of interventions, according to the comment.
Five-year government bonds rose, pushing the yield 13 basis points lower to 11.17 percent. The Finance Ministry will offer 5 billion rubles of August 2023 and 10 billion rubles of May 2019 OFZs on Wednesday, according to the website statement.
The Micex Index of stocks added 1 percent and the dollar-denominated RTS Index climbed 2 percent. OAO Magnit, Russia’s biggest food retailer, climbed 2.7 percent, the first increase in five days. Magnit’s retail sales rose 28.7 percent in May, it said Tuesday. OAO Gazprom and OAO Lukoil advanced as Brent crude increased 3.6 percent to $64.96.
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