Russia starts pre-emptive FX selling as rouble crashes

Russia's central bank pre-emptively started selling foreign currency on the market yesterday, for the first time in five years, to lower market volatility after a steep drop in the rouble, the bank said.

The bank did not disclose the amount of FX interventions it would carry out, however.

The move comes after the central bank suspended daily purchases of foreign currency for state reserves for 30 days in a bid to assuage downside pressure on the national currency, which fell to four-year lows on Monday, as oil prices crashed to their lowest in nearly three decades.

The central bank also said it was ready to engage additional instruments to preserve financial stability, amid a rapid slide in prices of oil, one of Russia's key exports.



Volatility

Analysts said the central bank's move raised hopes that the Russian market would stabilise during the day.

“These actions strengthen the idea that today the markets will recover,” said Kirill Tremasov, a former economy ministry official and head of investment at Loko-Invest.

A falling rouble often sparks concerns about inflation, as the stronger US dollar and euro against the national currency tend to filter into prices in Russia because imports become more expensive.

Volatility in the rouble also suffocates business and investment activity, as companies tend to play forex markets instead of focusing on developing their business.

– Nampa/Reuters

MOSCOW -