The national currency strengthening trend still to continue

This corresponds to a total of $25,4bn worth interventions, at the average monthly exchange rate. March 2014 became the 12^th consecutive month, when the Bank of Russia undertook interventions selling foreign exchange from its reserves. The regulator sold a total $69,2bn within the 12 months, including $41,1bn since the beginning of 2014. 

The Bank of Russia sold the biggest volume of foreign exchange on March 3, 2014 against worsening situation in the Crimea. At that period interventions increased in the volume requited for moving from $350m to $1,5bn the limits of the foreign exchange rate band for the dual-currency basket. Nonetheless, in March the band limits moved by 85 kopeks from Rb 35,4–42,4 as of February 28, 2014 to Rb 36,25–43,25 for the dual-currency basket since March 28, 2014.

The dual-currency basket reached its maximum value of Rb 43,08 as of March 18, 2014, as calculated on the basis of the dollar-euro official exchange rate. Most of the March interventions ($21,9bn) had been completed by that time. This was followed by drastic changes to the exchange rate dynamics, when the ruble strengthened up to 41.62 relative to the dual-currency basket. This indicates that the ruble even gained 1.4% vs. the dual-currency basket at the end of March.

This allowed the Bank of Russia to reduce the volume of interventions even below the “background” level typical of February 2014, $400m daily. In the period of March 20 thru 31, daily average interventions amounted to $258m, thereby saving more than $1bn of resources in the reserves.

The trend towards strengthening the national currency is likely to continue for some time in response to the “oversold” ruble at the acute phase of the Crimean crisis. 

Mikhail Khromov, a leading expert of Gaidar Institute’s Center for Structural Research