37482
Hard Currency, Gold Putin’s Top Reserve Priority
World Economy

Hard Currency, Gold Putin’s Top Reserve Priority

With Russia mired in the longest recession in two decades, there hasn’t been a lot of good economic news lately. But there’s one indicator that’s looking up, and it’s the one that matters most to Vladimir Putin: his hard-currency reserves.
The central bank held $379 billion in foreign exchange and gold as of Feb. 19, up $29 billion from lows touched last April, making Russia the only major emerging market with a gain, Bloomberg reported.
The economic experiment reflects Putin’s conviction that gold and hard currency in the bank are the best guarantee of Russia’s financial independence, according to senior officials who’ve discussed the issue with him.
While China and Saudi Arabia have spent tens of billions of dollars to shore up their currencies, the central bank in Moscow has gone cold turkey on intervention. Since blowing more than $67 billion in a failed effort to steady the currency at the end of 2014, Russia hasn’t spent a penny to prop up the ruble. In fact, it bought some foreign currency last spring.
“No amount of spending of currency reserves can stabilize the ruble,” Dmitry Tulin, first deputy governor of the central bank, said last month, a few weeks after the currency dropped to new lows. “It’s very easy to fire your whole arsenal quickly, but that would yield only a temporary, Pyrrhic victory.”

 Toll on Ruble
Last spring, when the currency staged a brief recovery, the bank moved in to buy $10.5 billion for its reserves, hastily suspending the effort when the ruble resumed its declines. Most of the rest of the gain in reserves comes from banks repaying hard-currency loans from the central bank and fluctuations in exchange rates, the bank said.
But the toll on the ruble has been heavy. The currency has lost a quarter of its value against the dollar since early last year and gyrated by as much as 5% per day early this year as oil prices tested the lowest levels seen in years.
“The central bank is ready to tolerate almost any volatility in the rate in order not to spend reserves,” said Oleg Kouzmin, economist at Renaissance Capital.
But the ruble’s drop has fueled a spike in inflation, reversing years of progress in the central bank’s efforts to rein in price growth. Consumer prices jumped 12.9% last year, the biggest calendar-year rise since 2008. The ruble’s drop accounted for the bulk of the increase, given Russia’s dependence on imports of everything from food to industrial equipment, according to the central bank.
While the weaker currency has opened the way for some local companies to compete with lower prices at home and abroad, the sharp swings in the rate complicate life for business.

Short URL : http://goo.gl/ZmkLZf
  1. http://goo.gl/3pQPK0
  • http://goo.gl/SiaTob
  • http://goo.gl/SemP6D
  • http://goo.gl/Y0PWYm
  • http://goo.gl/isYnHx

You can also read ...

Nigeria Inflation Dips Further
For the eight consecutive months, Nigeria’s inflation rate...
Exports extended their growth trajectory for the ninth consecutive month in August.
Economic growth in the third quarter is expected to receive a...
Capital outflows through the banking system have accounted for as much as $27 billion since the crisis.
Unsurprisingly, Qatar has been on the investor radar...
Ethiopia topped the list with FDI inflows surging  by 46% to $3.2 billion.
Foreign direct investment inflows to West African countries...
Currently, the total amount of the eurozone’s NPLs is estimated at $1 trillion. However, undercapitalized Italian banks are objecting  to such ECB recommendations.
The European Central Bank is poised to start wrapping up its...
Angola Rating Downgraded
Moody’s Investors Service has Sunday downgraded the long-term...
Every 1% increase in GDP is expected to equal roughly 1.8 million new jobs.
China’s unemployment rate has hit its lowest point in multiple...
Tanzania Current A/C Deficit Shrinks
Tanzania’s central bank revealed that its current account...

Trending

Googleplus