Bank Rossii changes FX interventions’ rules; yesterday’s interventions totaled $10.5 bln

RUSSIA ENERGY / FINANCE - In Brief 04 Mar 2014 by Marcel Salikhov

Bank Rossii officially announced yesterday that rules for FX interventions were changed and will be further modified according to changing circumstances. Since March 3, 2014 accumulated interventions to move operational band for 5 kopecks are set $1.5 bln compared to $0.35 bln before. Operational range for bi-currency basket was changed from 35,40-42,40 RUB (as of February 28, 2014) to 35,75-42,75 RUB (as of 3 March, 2014). That’s in increase of 35 kopecks. So yesterdays’ FX interventions can be estimated as $1,5 bln * (35/5) = $10,5 bln. The exact figure will be published tomorrow. Massive FX interventions helped to limit RUB devaluation yesterday to relatively modest levels (+0.9% for bi-currency basket value compared to 12% daily loss on equity). The changes in FX interventions policy accompanied with recent key rate increase mean that Bank Rossii is ready to defend current RUB levels with all means. Today’s news about termination of war games in Western district of Russia helped to calm investors and supported RUB. Changes basically undermine CBR’s credibility on moving to free-float regime. FX interventions that move ranges were gradually decreased in order to limit the influence of monetary authorities on FX market. It’s understandable that current situation is extraordinary and is mainly motivated by factors of non-economic nature. We expect that CBR will return back to $0.35 interventions level as soon as possible in order to limit credibility damage. Today First Deputy Governor Ksenia Yudaeva gave an interview to Russia-24 TV channel explaining CBR’s motives and further plans. The interview is is short on details. But she stated that further rates increase and...

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