All news

Impact of forex interventions on the ruble’s exchange rate could increase

MOSCOW, February 6. /TASS/. The impact of the Russian Finance Ministry’s forex interventions on the ruble’s exchange rate could increase in the second and third quarters of this year, experts at Sberbank CIB wrote in a CBR Review. Meanwhile, forex purchases are not expected to substantially weaken Russia’s national currency this month.

"In our view, FX purchases are unlikely to significantly weaken the ruble in February, given the favorable seasonality of the current account and relatively small debt repayments. However, the impact of the purchases could increase in 2Q-3Q, when the current account is smaller," Sberbank CIB said.

Meanwhile, the new intervention scheme could push USD/RUB to 64 rubles per dollar (which is the current Sberbank CIB year-end forecast) sooner than expected, the report said. "The pass-through effect of this amount of ruble depreciation is equal to a 1 p.p. boost to inflation, but this inflationary pressure should be counteracted by keeping monetary policy tight for longer," Tom Levinson, chief foreign currency and rates strategist at Sberbank CIB, said.

Earlier this month Russia’s Finance Ministry announced the launch of foreign exchange purchase and sale operations on the domestic forex market. The amount of operations will depend on the amount of oil and gas revenues of the Russian federal budget. The move is aimed at increasing the stability and predictability of the domestic economic environment and mitigating the impact of varying energy resources market situation on the Russian economy.

In February, the amount of extra oil and gas revenues will be worth 113.1 bln rubles ($1.9 bln). The Bank of Russia as assigned by the Finance Ministry will perform daily currency purchase operations worth 6.3 bln rubles ($105.9 mln) on Moscow Exchange over trading day in the period between February 7 and March 6, 2017.

The foreign currency purchases are expected to have an immaterial effect on money market rates, the Finance Ministry and Central Bank said.