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. Last Updated: 07/27/2016

Central Bank Intervention Gives Ruble Some Support

The ruble firmed against the dollar on Friday, helped again by Central Bank intervention, dealers said.

The ruble plunged 40 kopeks on the first trading day of the year Wednesday, before regaining some ground Thursday. It continued this upward progress, although dealers noted that the key support was the Central Bank.

"The main factor now is Central Bank sales in the [morning] unified session. It was present there almost all the time, that is why the trade volume is higher than usual," said Metallinvestbank dealer Sergei Romanchuk.

The ruble's weighted average in the unified session, which brings together eight exchanges and is the basis for the Central Bank's official rate, firmed to 30.4399 rubles per dollar from 30.4999 in the previous trade. Trade volume was $285 million, with the Central Bank accounting for some $100 million in dollar sales, dealers said. Dealers said the Central Bank had apparently sold about $800 million since the start of the year.

However, the bank's hard currency reserves showed a rise in the latest weekly period, to Jan. 4. They were at $36.7 billion, up $200 million.

Dealers said that despite the rising ruble, the dollar was the key target for buying due to low overnight ruble credit rates of 3.75 percent to 5.75 percent .

"Banks are accumulating long hard currency positions for themselves and this may end badly," a dealer said. But he noted ruble liquidity was going down and saw the currency heading back up to 30.40 to the dollar next week.

He pointed out that banks' balances on their correspondent accounts at the Central Bank, the main indicator of liquidity, have been falling gradually since the end of 2001, when they hit a record.

On Friday, they slipped to 81.61 billion rubles from 85.25 billion rubles Thursday. Romanchuk said the market was still wondering where the Central Bank wanted the ruble.

"Ruble rates remain low, but banks are wary of the Central Bank selling more hard currency, and this does not allow them to gamble on a rise [in the dollar]," he said.