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. Last Updated: 07/27/2016

Currency Bolstered By Reserves

The Central Bank purchased a record-setting $1.1 billion worth of rubles in January, but fears that hard currency reserves would be sapped and the ruble corridor left helpless are unfounded, analysts said.


Seasonal factors -- year-end salary payments and bonuses -- flooded the market with potentially inflation-driving rubles and forced bank officials to take the measures, said Igor Doronin, an analyst with the Moscow Interbank Currency Exchange.


But February saw the bank replenish its reserves with $1.1 billion in hard currency purchases, also attributed to seasonal factors and foreign money coming into the securities market, said Igor Vasiliev, head of the hard currency department at Alfa Bank. The trend is likely to continue in March, he said.


Foreigner investors must turn their hard currency into rubles to invest in government securities, driving up demand for rubles.


The Central Bank's hard currency reserves, commonly estimated at about $14 billion by analysts, are typically used to defend the ruble against wild fluctuations that can lead to inflation and sow widespread distrust in the currency.


Monetary authorities have followed a crawling corridor exchange rate regime, allowing the ruble to steadily depreciate. According to the Central Bank's policy, the ruble -- slated to trade at 5,712 to the dollar on Thursday -- should be at a 5,750- to 6,435-per-dollar range by the end of 1997.


"The Central Bank's reserves are fine. The market is not concerned about the ruble," said a Western fund manager, adding that there was widespread confidence the Central Bank will be able to maintain the stability of the financial markets.