Russia to Restart Foreign Exchange Purchases on Monday

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Russia to Restart Foreign Exchange Purchases on MondayRussia will resume its foreign currency buying program to shore up its reserve fund starting April 14, said its finance ministry on Thursday. It will buy volumes amounting to 3.5 billion roubles ($98 million) every day.

The plan will one affect the exchange rate marginally, said Dmitry Polevoy, a Moscow-based chief Russia economist at ING Groep NV, in an e-mail to Bloomberg.

The ministry added that it will halve the purchases of the foreign exchange to 1.75 billion rubles if the ruble plunges against a basket of dollar and euro into a range nearing the limit where the central bank intervenes. The buys will stop once the ruble hits this limit. The currency was up 0.2 percent against this basket at 41.6932 in Moscow close.

The three-month implied volatility of the ruble remained static at 11 percent on Thursday, which is less than a March 3 high of 12.7 percent.

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“Demand is returning to the ruble bond market due the stabilizing currency and because the government canceled a bond auction this week,” Konstantin Artemov, a Moscow-based fund manager at Raiffeisen Asset Management told Bloomberg.

Yields of the bonds that mature in 2027 stood at 9.03 percent, or 17 basis points, in April 7. This pushed the Finance Ministry to roll out its fifth ruble bond auction in 6 weeks.

Gold and foreign currency reserves at the central bank declined by $10.1 billion to $473.9 billion in the week ended April 4.

In separate news, Russian stocks also gained on Thursday as the market remained optimistic that a diplomatic solution will help ease Ukraine tensions. The Micex Index was up 1.4 percent at 1,467.71 in Moscow close.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com