Bloomberg News

Russia’s Foreign Reserves Tumble $9.2 Billion, Most Since May

October 06, 2011

Denis Maternovsky

Oct. 6 (Bloomberg) -- Russia’s international gold and currency reserves declined for a fourth week, plunging $9.2 billion, the most since May, as Bank Rossii bought rubles, stepping up its defense of the currency.

The country’s reserves tumbled to a four-month low of $516.8 billion in the week to Sept. 30, the central bank said on its website today. The four-week decline of $26.6 billion is the steepest since January 2009, when Bank Rossii arrested a ruble devaluation. The ruble depreciated 10 percent against the dollar in September.

Policy makers in emerging markets are seeking to bolster their currencies as the debt crisis on both sides of the Atlantic drains capital. Concerns that economic growth is slowing have sent commodity prices lower and cut demand for riskier emerging market assets. The stock market in Russia, which depends on oil and natural gas sales for as much as 40 percent of its budget revenue, tumbled 12 percent in September, the worst decline since June 2009.

“It’s getting more difficult,” VTB Chairman Andrei Kostin said today in an interview with Bloomberg Television in Moscow. Tapping “liquidity from the market, the financial market, is very difficult for Russian companies and Russian banks” as Bank Rossii takes rubles out of the market.

No ‘Severe Squeeze’

The central bank sold about $8 billion to shore up the currency in September, the most since the ruble’s devaluation in January 2009, Chairman Sergey Ignatiev told reporters in Moscow yesterday. The regulator intensified sales on Oct. 4, selling $1.15 billion on the currency market, he said.

The problem is “manageable,” with the Finance Ministry providing more than 1 trillion rubles ($31 billion) in auctions to banks, Kostin said. Russia is not facing a “severe squeeze” as it did in 2008, he said.

The ruble strengthened 0.4 percent to 32.4395 against the dollar at 1:29 p.m. in Moscow.

Bank Rossii’s reserves are likely to rise by the end of the year, central bank First Deputy Chairman Alexei Ulyukayev said today at a VTB-sponsored conference in Moscow. The currency is more likely to strengthen against other currencies than weaken in the near term, he said.

--Editors: Torrey Clark, Peter Branton

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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