Bank of Russia reduces the volume of accumulated interventions

As a reminder, $350m of accumulated interventions shifted the trading band only in the period between December 10, 2013 and March 2, 2014. The Bank of Russia later increased the amount to $1500m when financial markets faced higher volatility in response to geopolitical tensions. At the same time, earlier in May the regulator reduced by $100m the volume of currency interventions aimed at flattening the volatility of the ruble exchange rate within the internal ranges of the floating trading band.

In mid-June the Bank of Russia lowered by another $100m the volume of currency interventions aimed at flattening the volatility of the ruble exchange rate within the internal ranges of the floating trading band and reduced by $500m to $1000m the amount of accumulated interventions which shift the ranges of the trading band. The width of the range of acceptable fluctuations of the ruble value of the dual-currency basket has been set Rb 7 for more than two years since July 24, 2012.

The said width has been broadened to Rb 9 since August 18 of the current year, in which case the Bank of Russia has stopped currency interventions aimed at flattening the volatility of the ruble exchange rate within the internal ranges of the trading band.

Although the Bank of Russia has retained its presence in the domestic foreign currency market, the regulator's policies will apparently make the trading band limits more sensitive to the volume of regulator's interventions. Eventually, this means that the role of market factors will increase in the process of exchange rate formation in the internal market, and the ruble exchange rate will therefore be exposed to stronger volatility, especially within the trading band range.

Pavel Trunin, Ph.D. in Economics, Director of Center for Macroeconomics and Finance of Gaidar Institute,
Anna Kiyutsevskaya, Ph.D. in Economics, senior researcher