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Russian rouble falls as central bank starts forex purchases
May 14, 2015 / 7:12 AM / 3 years ago

Russian rouble falls as central bank starts forex purchases

MOSCOW (Reuters) - The Russian rouble fell sharply on Thursday after the central bank announced it was buying foreign currency worth $100-200 million daily to replenish its reserves, a sign that it believes the rouble has strengthened far enough.

An employee counts Russian rouble banknotes in Stavropol, southern Russia, December 17, 2014. REUTERS/Eduard Korniyenko

At 0745 GMT, the rouble was around 1.7 percent weaker against the dollar at 50.11 and down 2.2 percent to 57.18 versus the euro.

The rouble’s weakening also reflected a softening of oil prices, with international benchmark Brent down 0.5 percent to around $66.5 per barrel.

The central bank’s announcement that it is buying foreign currency comes a day after the rouble hit its highest levels since November last year, reaching 48.83 against the dollar.

Some analysts had said the dollar-rouble rate was unlikely to remain below 50 as the central bank would intervene to prevent excessive rouble appreciation.

In a statement, the central bank said its decision to purchase forex “was taken considering the normalisation of the situation on the internal currency market and isn’t directed at supporting a particular level of the exchange rate”.

The bank’s move to buy forex represents a reversal from its actions last year, when the bank expended reserves to defend the rouble, which fell on slumping oil prices and Western sanctions linked to the Ukraine conflict.

Over recent months the rouble has staged a strong recovery since hitting a low of 80 to the dollar in late January, helped by a partial rebound in oil prices and February’s peace deal in eastern Ukraine.

The rouble’s rise has prompted a series of central bank policy steps, including higher rates on its forex loans and cuts in its main rouble lending rate, but the rally continued.

Russian stock indexes were also weaker on Thursday, with the main losses concentrated in the dollar-based RTS index that is negatively impacted by a weaker rouble.

At 0745 GMT the RTS was down 2.4 percent at 1,056 points while the rouble-based MICEX had fallen 0.2 percent to 1,678 points.

(Story refiled to clarify tense in paragraph 5)

Reporting by Jason Bush, editing by Elizabeth Piper

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