Concern leads to a decrease in current operations which are not related to oil and gas exports

On April 4, the Bank of Russia intervened in the domestic foreign exchange market for the first time since November 2012.

According to a report on liquidity factors in the banking sector, Bank of Russia’s interventions reduced banking liquidity by Rb 0.03bn as of April 4, i.e. the interventions were insignificant, approx. $1m. 

According to official foreign exchange rates quoted by the Bank of Russia, the current value of dual currency basket (which includes $0.55 and 0.45 euro) was Rb 35.18 as of April 4, Rb 35.45 as of April 5. These values are maximum since the end of December 2012. The dual currency basket value was less than Rb 35 throughout the entire Q1 2013. 

Nevertheless, the dual currency basket value is still in the middle of the floating corridor established by the Bank of Russia (Rb 31.65 to 38.65). Normally, the Central Bank of Russia resorts to interventions in the foreign exchange market in cases when current value of the basket is approaching the limits of the corridor. The yesterday interventions could be in response to a rapid devaluation of the ruble against the US dollar and euro. 

In its turn, rapid devaluation of the ruble over the last week (from April 1 to April 5 the ruble lost 2.0% against the US dollar and 0.9% against the euro) could be caused by fall of world oil prices (Brent oil fell from $110 до 107 on April 3). However, oil prices stopped falling on Thursday and Friday, and this factor ceased to have its immediate effect.

In the mid-term perspective, dynamics of currency exchange rate is expected to be governed by the ratio of demand for and supply of foreign currencies at the macro level. From this point of view, a special concern is triggered by reduced (negative value growth) current operations which are not related to oil and gas exports, which in Q1 2013 reached a record of $58bn. Another $26bn is accounted for net capital outflow from the non-public sector. Thus, resumed fall of prices of energy mineral resources and lower supply of foreign currencies can further devaluate the ruble.

Khromov M.Y. – leading expect, the Center for Structural Studies