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Russia Central Bank buys dollars for 4th day – dealers

Posted on: March 25, 2009


Reuters – Wednesday, March 25

By Andrei Ostroukh and Toni Vorobyova

MOSCOW, March 24 – Russia’s central bank intervened in the currency market for a fourth session running on Tuesday, buying dollars to keep a lid on the rouble’s rally to two-month highs, dealers said.

The rouble, aided like other emerging currencies by improved global risk appetite, remained on a strong footing despite a bout of profit-taking in Russian stock markets <.MCX><.IRTS> — which hit 4-1/2 month highs on Monday — and on oil prices.

The rouble firmed to a two-month high of 38.57 versus a euro-dollar basket, according to Reuters data <RUS=MCX>, before closing little changed on the day at 38.70.

“The market’s a happier place again, spring has sprung and everyone is short dollar-rouble again,” said a trader at a foreign bank in Moscow.

“It probably will continue as long as stocks and oil stay bid. The positioning is still quite light.”

The rouble had lost around a third of its value in a six-month slide to adjust to Russia’s worst economic outlook in a decade, part of a crisis that has put pressure on its political elite.

The central bank spent tens of billions of dollars keeping the currency depreciation gradual and it has pledged to keep the rouble within a 26-41 range versus the basket.

But it has also said it would intervene to prevent excessive volatility and officials have indicated that they see current exchange rate levels as appropriate given the present price of the country’s key export, oil.

Dealers said the central bank appeared to be moving its bid by around 5 kopecks at a time — at first buying foreign currency around 38.70 roubles versus the basket, and then moving gradually to 38.59-38.60 by mid-session.

Dealers estimated Tuesday’s interventions at $1.5-2.0 billion, taking the value of dollar purchases for the last four trading days to around $4.5 billion.

“I don’t think the central bank has any desire for a strong appreciation of the rouble,” said another dealer.

WEAKER IS BETTER?

A weaker currency benefits exporters but Economy Minister Elvira Nabiullina on Tuesday cautioned against excessive moves.

“There is now a real risk of a global devaluation race due to attempts by individual countries to stimulate economic growth,” she said.

“Triggering that process may become as dangerous for the world economy and trade as direct protectionism.”

Analysts say the upward pressure on the rouble gives the central bank an opportunity to replenish gold and forex reserves — down by over a third from their August peak to $376 billion.

The central bank’s own measures on Tuesday contributed to tighter liquidity and demand for roubles. It cut the amount on offer at its first repo auction of the day to 10 billion roubles, the lowest since limits were introduced in September. The daily cap for FX swap operations with the central bank was set at zero for the first time since January.

However, dealers said such liquidity restrictions were partly offset by the central bank’s rouble selling interventions, as well as by the injection of budget funds into the economy.

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