Central Bank of Russia suspends replenishment of its foreign exchange reserves, as “volatility in domestic market grows”

As volatility in the domestic foreign exchange market is growing, the Bank of Russia has suspended operations to replenish international reserves starting July 28, 2015, the banking regulator says in a statement.

Since May 13, 2015, the Central Bank of Russia had been buying foreign exchange in the domestic currency market to replenish international reserves. The Bank made such decision to normalize the situation in the domestic currency market. It did not seek to support the currency rate. The operations totaled $100-$200 million. In the period from May 13 up to July 23, the Central Bank bought more than $10 billion in the domestic market.

At the July 27 auctions, dollar appreciated by 1.22 rubles exceeding 59 rubles for the first time since March 23. Euro appreciated by 2 rubles exceeding at once 65 and 66 rubles. On the next day, on July 28, ruble continued depreciating and during the Tuesday auctions, dollar rose to 60.93 rubles and Euro – to 67.27 rubles.  Eventually, this volatility in the market made the Central Bank reduced the purchase of foreign exchange to $160 million on July 27.  In the course of the previous 33 trading days, the Bank bought by $200 million daily.

According to the Central Bank’s statement, the amount of operations was reduced and then suspended, as the market is too volatile. To minimize the influence on the foreign exchange rate dynamics, the Bank will be buying equal amounts of foreign exchange within a trading day. Yet, in case of any significant changes in the foreign exchange market, the amount of operations may be corrected, the Bank says in the statement.