The Bank of Russia actively buying currency, the dollar in Russia will grow

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As everyone already knows, the Bank of Russia on Friday raised its key interest rate by 0.25 percentage points to 7.75% per annum and at the same time announced from January 15 to return to the market with purchases of dollars in favor of the Ministry of Finance to replenish the reserves. Purchase of foreign exchange was suspended in August after the next collapse of rouble will resume, “taking into account the stabilization” of the situation. With this purchase, deferred in the current year, can be carried out gradually in 2019 and subsequent years.
The rate increase the Central Bank justified the increased inflationary risks (“Elevated inflation expectations can change consumer behaviour, reduce incentives to save” – from the point of view of the Central Bank of the Russian Federation, the increase in spending as opposed to savings – probably considered negative). The regulator considers that in the first quarter of next year, price growth could accelerate to 5.5−6%, but then pauses.
And yet the regulator sees risks consolidate an inflation rate above the target of 4% for a long time that, in our opinion, is almost inevitable in the context of the ongoing creeping devaluation of the ruble. But the tightening of monetary policy in a preemptive mode – it should be noted, is a very unusual move.
Judging from the markets “didn’t believe” the Central Bank in the main underpinnings of his unexpected decision to prevent acceleration of inflation and concluded that the main reason for this action of the financial regulator began preparing for the resumption of buying of currency at the exchange after the January holidays. This year (from 15 January 2018, 14 January 2019) Ministry of Finance, in spite of the de-dollarization, it was planned to purchase foreign currency for the needs of NWF, for a total amount of 4.2 trillion roubles, however, the Central Bank this year took an unplanned pause in the action in April after a history of sanctions against RUSAL and Renova and August, after the announcement of the second wave of sanctions.
After that, the Central Bank tried to return to the market, but still hold a strong ruble exchange rate risks, and it is obvious that all this time the Bank of Russia was under the stress of making the wrong decision, and for this reason lived in idle mode, improve the overall market for the ruble. As a result, to purchase foreign currency from January 15, 2018, the Central Bank has spent only 2 141 billion. After “showered” oil regulator, it became clear that conditions in the foreseeable future will not be better, as the events of last Friday, he waved his hand and took the position of low start.
However, the ruble against this background somehow discount the risk of renewed currency intervention, and decided to focus on the fact that the European Council in a statement on Friday, the summit did not insist on imposing new sanctions against Russia, contrary to the pedalling of this subject by representatives of Ukraine, Poland and the Baltic countries.
As a result, as of 13:00 Moscow time the ruble on Masuria today with the opening started slow strengthening against the dollar, up about 28 cents (or 0.4%) to 66.47. In tandem with the Euro is also significant exchange rate movements is not observed, and the ruble is trading at 75,32 rubles per unit of the Old world. The main Russian assets of almost “stand still” while gold slipped $9 to $1243/oz, although in the latter case, there is an attempt to go back to the comfort zone above $1250/oz.
Vladimir Rojankovski,
“International Financial Center”