04 February 2005, 09:21 Business

The Central Bank paid back on reserves

Georgy Demidov The volume of gold and foreign exchange reserves of the Bank of Russia has grown - sharply and to indecently large sizes. According to the Central Bank, as of January 28, reserves amounted to $128.3 billion. Thus, over the week the volume of gold and foreign currency reserves increased by $9.6 billion, or 8%.

In other words, during the week the Central Bank recouped the drop in gold and foreign exchange reserves, which occurred between January 7 and January 21, when gold and foreign exchange reserves decreased by $5.9 billion, by more than one and a half times.

The growth of gold and foreign exchange reserves by $9.6 billion really falls outside the normal course of events in the foreign exchange market, because there was no mass dump of currency through exchange trading in such volumes for the period from January 21 to January 28.

“It can be assumed that the Bank of Russia carried out one-time operations to purchase currency, standing on a par with the “Indo-Chinese” loans, which have been talked about a lot lately and about which it is not known for certain whether they existed or not,” says an analyst at Zenit Bank » Danila Levchenko. We are talking about recent statements by Vnesheconombank and a number of other government agencies that they did not allocate funds for the purchase of Yuganskneftegaz.

“Recently, in its report on the state of financial markets in December 2004, the Central Bank already spoke about the “demand for ruble resources to finance large corporate transactions” that took place at the end of last year. This demand led to a large-scale reduction in investments of individual unmentioned banks in Central Bank instruments - deposits, Bank of Russia bonds, reverse repos - and to the Bank of Russia’s purchase of government securities, which these banks usually keep in their portfolios,” notes Levchenko. This report from the Central Bank talked about an amount comparable to the current sharp increase in gold and foreign exchange reserves - about 200 billion rubles, the analyst notes. “In order to finally understand the abrupt growth of gold and foreign exchange reserves last week, it is better to wait for the next report or leak of insider information,” says Levchenko.

Most likely, the market believes that the Central Bank actually bought currency from individual banks directly, without going to the stock exchange. Such transactions are often used in the practice of communication between the Central Bank and large banks and are not prohibited by law. In addition, they allow you to avoid sharp fluctuations in the exchange rate during currency trading - after all, if someone puts up a large lot of currency for sale on the exchange, then the volume of the lot is seen by all trading participants and this brings down dollar quotes. Direct transactions such as “Bank of Russia - commercial bank” take place at the negotiated rate, without causing a stir in the market. Judging by the course of trading on the MICEX for the week from January 21 to 28, the Central Bank could not quietly buy $10 billion on the exchange. “An indirect confirmation of this was the sharp reduction in the supply of dollars from participants in special sessions of the MICEX just from the twentieth of January of this year,” according to analysts from the RosBusinessConsulting agency.