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. Last Updated: 07/27/2016

Ruble's Decline Slowed By Bank Intervention?

The fall of the ruble slowed Thursday, losing only six points to the dollar amid speculation that the Russian Central Bank had intervened to support the currency.


The exchange rate of the ruble slipped to 829 rubles to the dollar from 823 in trading Thursday at the Moscow Interbank Currency Exchange.


Yury Shchegolkov, head of the information service at the exchange, said the large supply of dollars indicated that the Central Bank had intervened to support the ruble, although the bank keeps its activity on the exchange secret. Supply of dollars was $70. 7 million, against a demand of $87. 9 million.


Total volume traded was $86. 7 million, against the previous volume of $51. 2 million Thursday, when the ruble last traded before the May Day holiday.


Shchegolkov said that the slowdown in the fall of the ruble in recent weeks followed a slowdown in inflation since January.


The ruble has lost 8. 5 percent of its value in the five trading sessions from April 1-15 but has lost only about 6 percent of its value in the five trading sessions that followed leading up to Thursday.


Inflation for April was recorded at 16 percent, down from 17 percent in March and 29 percent in February, said Vladimir Sokolin, head of the economic trends section of the Center of Economic Analysis and Forecasting at the Economics Ministry.


The ruble's small decline over the past few trading sessions indicates that the banks participating in the exchange were confident the Central Bank would stick to its promises of a strict credit policy, which would bring down inflation even further, Shchegolkov said.


High inflation, in part a result of loose credit emissions, has led Russian enterprises and banks to seek refuge in the dollar, driving down the ruble's value. At street kiosks, traders offered 830 to 860 rubles to the dollar, up slightly from last week's rates. Street traders usually offer higher rates and tend to act on expectations of the ruble's value.


Contradicting this trend was the sharp fall of the ruble against the Deutsche mark Wednesday. The exchange rate fell to 550 rubles to the mark, down from 492. Shchegolkov dismissed that fall as an "exchange game" by banks, referring to speculation by banks that does not reflect actual supply and demand. Turnover at the trading sessions of the Deutsche mark range around 10 million Deutsche marks ($6. 3 million).


But Shchegolkov did not see any reaction at the exchange to an announcement by Deputy Prime Minister Alexander Shokhin on Wednesday that Russia hoped to receive $1. 5 billion of a new $3 billion in IMF support by July. The dollar market tends to react very slowly to political events, often with a two week delay to allow customers to gather enough rubles and apply for currency purchases.


"The market will only react to stability", Shchegolkov said.