MOSCOW, May 15 (Reuters) - Russia’s central bank has reduced the amount of foreign currency it sells on the market to support the rouble as the price of oil - a key export - has risen, data showed on Friday.
The central bank began selling foreign currency from state reserves in March for the first time since early 2015 as the rouble slid to four-year lows amid a crash in oil prices and the global spread of the novel coronavirus.
Since Wednesday, the central bank has only been carrying out regular foreign currency sales, within budget rules. It has stopped additional sales related to the price of Urals, Russia’s blend of crude oil URL-E, which has recovered a little after tumbling below $25 per barrel.
The central bank, which reports its foreign currency sales with a two-day lag, said on Friday it sold 11.4 billion roubles ($155 million) worth of foreign currency on Wednesday, down from around 20 billion roubles in early May.
“In the absence of stable demand for currency from local businesses, this is enough to maintain a balance for now,” said Dmitry Polevoy, chief economist at the Russian Direct Investment Fund.
Oil prices have steadily increased this month as lockdown restrictions around the world gradually begin to be eased, with previously shuttered economies sputtering back into life.
The Bank of Russia, which let the rouble float freely in late 2014, uses two formulas to determine the level of foreign currency sales, which, it says, are aimed at reducing volatility and the financial risks it bears.
It sells foreign currency under Russia’s fiscal rule when prices for Urals fall below $42 per barrel, the threshold crossed on March 3.
Another mechanism, related to the government’s deal to purchase the central bank’s stake in lender Sberbank, allows extra foreign currency selling when Urals prices fall below $25 to compensate for the shortfall of currency conversions from the revenue of export-focused companies.
The lower the oil price, the larger the interventions.
Urals prices fell below $25 on March 18, triggering the second mechanism, but have held above that since May 7. On Friday, the price reached almost $31 for the first time in two months.
The central bank has repeatedly said it does not target a specific rouble exchange rate.
$1 = 73.5400 roubles Reporting by Elena Fabrichnaya, Additional reporting by Vladimir Abramov; Writing Alexander Marrow; Editing by Mark Potter