Russia to restart foreign exchange reserves buying
File image shows an exterior view of the Russian Central Bank headquarters in Moscow, Russia, Dec 14, 2018. Russia announced on Jan 11, 2019 it would resume foreign currency purchases via its central bank, spending 257 billion rubles ($3.8 billion) on foreign currency, from Jan 15 to Feb 6, or about $232 million a day. EPA-EFE (FILE) /YURI KOCHETKOV
Moscow, Jan 11, (efe-epa).- Russia will resume foreign currency purchases on the open market to boost sovereign reserves after an eight-month break, a sign of the country's fading fears that major new sanctions will sink the ruble, according to a Dow Jones report supplied to Efe on Friday.
Russia's Finance Ministry will spend 257 billion rubles ($3.8 billion) on foreign currency from Jan 15 to Feb 6, or about $232 million a day, the ministry said. The announcement, which was expected, didn't cause major movement in the ruble-dollar exchange rate, with one U.S. dollar buying 67 rubles Friday.
The Russian government by law puts the money it earns from oil sales above $40 dollars a barrel into international reserves to reduce the country's vulnerability to oil market shocks. Last April, after the ruble was hit by damaging US sanctions and a slump in emerging markets, the country stopped buying foreign currency on the open market in an effort to stabilize the currency.
The resumption of dollar purchases, in theory, could put further pressure on the ruble. But Russia's central bank, which buys foreign currency for the finance ministry, said the resumed purchases will be gradual and modest in daily volumes to keep the ruble exchange rate stable.
Russia's currency lost nearly a quarter of its value against the dollar in 2018, fueling inflation and wiping out real income growth, but was stable the last few months of the year.
Russia's foreign exchange market re-entry, which was announced in Dec, shows its officials believe the worst impact of existing Western sanctions designed to punish Kremlin's meddling in elections and use of chemical weapons has faded. On Thursday, the US Treasury Department reaffirmed its intention to lift sanctions on Russia's largest aluminum producer Rusal.
The "sanctions risk has diminished," said Richard Segal, an emerging-market analyst at Manulife Asset Management. "The Russian economy doesn't have much dynamism, but it is stable and these days stability is a more valued commodity than growth with the risk of volatility."
Russia hopes building up reserves will provide it with a financial bulwark should relations with the West deteriorate again. To reduce its exposure to the dollar, on Thursday, the country's central bank revealed that it had brought its dollar holdings to a record low, moving $100 billion in 2018 into euros, yuan, and yen to safeguard against any future restrictions on Russia's use of the US financial system, the Dow Jones report added.
Only 22 percent of the central bank's $460 billion reserve stash was in dollars at the end of June, compared with 46 percent a year earlier, show the bank's latest figures. The overall level of reserves has recovered from as low as $356 billion in 2015 when the central bank was spending dollars to prop up the ruble in the face of sanctions and collapsing oil revenue.