Devaluation of ruble: Fact and fiction

There are rumors stirring up in Moscow about the coming devaluation of the Russian ruble, that the Central Bank cannot keep the ruble rate from falling. The gold and value reserves of the Central Bank dropped by 2.5 billion dollars just within one week. This took place in 1988 already. The Central Bank placed some four billion dollars on the market in order to save the drowning ruble. The State Duma sent a parliamentary inquiry to the chairman of the Central Bank of Russia, Viktor Gerashenko, “about the reasons of the reduction of the Russian Federation gold and value reserves.”

As a RIA Novosti correspondent stated, the inquiry was sent on the initiative of several members of the parliamentary budget committee: representatives of the factions Unity, Fatherland-All Russia, Yabloko, and others.

Clarifying the necessity of sending such an inquiry, Mikhail Zadornov, the deputy chairman of the Duma’s budget committee (Yabloko faction) advised, that according to the information that the deputies had, the gold and value reserves of Russia had dropped by 2.5 billion dollars since the beginning of December. However, Zadornov stressed that the reserves restored last week, and for the time being, they make up $36.2 billion, like before. Nevertheless, the deputies would like to receive information on why the gold and value reserves decreased.

The reason for such a sudden reduction of the gold and value reserves of the Russian Central Bank is most likely the fact that the Central Bank was purchasing dollars during last week in order to make a more pleasant figure for the officials than 30.5 rubles per dollar at the end of the year. Tatiana Paramonova, the first deputy chairman of the Central Bank, stated to the Vedomosti newspaper that the reserves were growing so as to spend them on rainy days, which had come today. The currency interventions continued today, although on a smaller scale. In the meantime, neither the Central Bank nor analysts can answer a simple questions. What is it that makes the days “rainy,” why the Central Bank cannot let the ruble rate go down? Why spend the reserves for the prevention of a moderate devaluation (some 4-6%), which will not compensate for the growing of the real ruble rate in the first half of the year?

Apparently, if the Central Bank is really interested in the stability of the ruble rate, then it will have to continue the currency interventions. If the Central Bank decides to save the reserves, then the ruble will drop. The market-makers are inclined to this very development of the events. Andrey Samoilov, the supervisor of the department for the dealing operations of CreditTrust Bank said that the dollar rate may reach the level of 31.0 rubles by the new year on the Moscow Inter-Bank Currency Exchange (MICEX), at the official rate of 30.5 rubles per one dollar. The reason of such sentiments is not in the new year expectations only but also in the fact that the government set the level of 30.5 rubles per dollar as the limiting one for the growth of the dollar rate this year. Therefore, we have the currency market, but the government and the Central Bank has a currency schedule.

The chief economist of the Troyka Dialogue investment company, Oleg Vyudin, considers the policy of the Central Bank to be wrong. He thinks that a gradual 5% devaluation of ruble is possible and there is no need to sell out the reserves. The pressure on ruble traditionally gets weaker at the end of the year and the Central Bank can take the initiative again and control the rate the way it wants.

The Central Bank probably believes that there will be no need for mass interventions after December 20th, since the banks will have to make fiscal payments, and this may take a big part of excessive rubles. So, the Bank chose the current days for the currency interventions, hoping there would be no need in the future. Anyway, the Central Bank has said nothing yet about the motives of its behavior on the currency market.

Dmitry Litvinovich PRAVDA.Ru

Translated by Dmitry Sudakov