Russia’s central bank intervened in the currency market for the third time this month, bringing to more than $1.4 billion the amount it spent to slow the ruble’s world-beating decline.
The monetary authority bought $420 million of rubles on Oct. 6, according to data released today on its website, adding to almost $1 billion of interventions last week as the currency crossed the upper limit of its trading band, Bloomberg reported.
The bank shifted that boundary by 5 kopeks to 44.65 versus its dollar-euro basket yesterday, a level the ruble surpassed again today (Wednesday).
The US and European Union have imposed sanctions on Russian individuals and companies that curbed access to overseas financing and fueled an exodus of foreign capital just as a drop in the price of crude saps export revenue.
“The ruble is coming under pressure due to the falling oil price and geopolitical uncertainty,” Anvar Gilyazitdinov, who manages $10 million at Rye, Man & Gor in Moscow, said by phone. The currency’s drop below 40 per dollar “is an important psychological threshold for the Russians, so the central bank is forced to intervene at this level.”
Debt Sale
The slide in the ruble, which crossed 40 per dollar Wednesday before recovering, is exacerbating the nation’s struggle with inflation. Price growth soared to a three-year high of 8 percent last month amid a surge in the food costs linked to an import ban Putin instituted in August to retaliate against sanctions.
Appetite for Russian debt is dwindling, with the government failing to get bids for the entire 10 billion rubles it sought at an auction today. It sold 4.5 billion rubles ($112 million) of the notes due in August 2023 as yields climbed 26 basis points from a sale two weeks ago.
The interventions have so far failed to stop the ruble’s retreat, with the currency falling 0.1 percent against the basket to 44.7672 by 4:10 p.m. in Moscow. The Bank of Russia will probably need to spend as much as $30 billion in the currency market by year-end, according to Uralsib Capital.
Brent oil fell as much as 1.5 percent to $90.76 per barrel in London today, the lowest level in more than two years. Russia derives about half of budget revenue from oil and gas.
