Reserves plummet to 20-month lows

Russia's international reserves as of January 16, 2009 amounted to $396.2 billion, having decreased by $30.3 billion over the week, the Department of External and Public Relations of the Bank of Russia reported on Thursday. Interfax reports about this.

The current decline is one of the most significant in history. Prior to this, a comparable weekly decline in Russia's international reserves was recorded in October 2008, when in the week from October 17 to October 24 they fell by $31.0 billion, or 6.0%, which was a record in the entire post-Soviet history of the country.

The last time the volume of international reserves was below $400 billion was about 20 months ago - on May 18, 2007, the level of $394.3 billion was recorded, and then the reserves exceeded $400 billion and never fell below.

According to experts, the decline in Russia's international reserves last week is due to two main factors. The main factor is foreign exchange sales by the Central Bank of the Russian Federation, carried out as part of containing the depreciation of the ruble against the bi-currency basket (operational indicator of the Central Bank of the Russian Federation, $0.55 and EUR 0.45). During the first week of the year, the Central Bank lowered the ruble against the bi-currency basket 5 times, which during this time increased by 2.5 rubles. At the same time, market participants actively bought currency, including for reasons of short-term speculation. According to estimates, the total volume of foreign exchange sales by the Central Bank of the Russian Federation could amount to about $25 billion.

The second factor, which had a lesser impact, was the depreciation of the euro and the British pound against the US dollar. According to express estimates, due to this reduction, the estimate of reserves could be reduced by an additional $5 billion.

Perhaps, now that the situation on the foreign exchange market has changed, and banks have discovered that they urgently need rubles to make mandatory payments at the end of the month, the Bank of Russia will have a good opportunity to somewhat increase its emptying reserves. Let us recall that on Tuesday, January 19, the foreign exchange market turned in the direction opposite to that in which it had been moving since the summer of 2008 - the ruble began to strengthen against the bi-currency basket.