Translated material
Coercion to the ruble
Dmitry Medvedev restored hope for stability to the foreign exchange market
The statement by Russian President Dmitry Medvedev about ending the military operation in South Ossetia was the main reason for the strengthening of the ruble against major world currencies. The dollar to ruble exchange rate fell yesterday by 0.9% - from 24.57 to 24.34 rubles, the euro exchange rate - by 1.6%, from 36.78 to 36.18 rubles. According to market participants, the outflow of foreign capital has stopped; Russian banks, however, still experience a liquidity shortage. This is evidenced by the results of the Ministry of Finance’s auction for the placement of budget funds; yesterday banks raised 119 billion rubles. of the proposed 300 billion rubles. Since the spring of this year, when the Ministry of Finance began holding these auctions, financial institutions have not borrowed so much money. In addition, banks raised another 241.6 billion rubles from the Central Bank at direct repo auctions.First Deputy Chairman of the Central Bank Alexey Ulyukaev said yesterday that there will be no repetition of the liquidity shortage that occurred last fall this time. Moreover, the regulator is ready to provide banks with 1 trillion rubles. in a very short period of time. Market participants tend to trust the regulator.
The panic in the foreign exchange market that reigned over the last two trading days seems to have stopped. First, investors have calmed down a little after Mr. Medvedev's announcement that the operation in South Ossetia would be terminated. Secondly, the Central Bank actively carried out currency interventions, preventing a significant strengthening of the dollar exchange rate - thereby the regulator significantly cooled the ardor of speculators who wanted to make money from the fall in the ruble exchange rate. As a result, the value of the bi-currency basket yesterday was already 29.6 rubles, although the day before it was trading at 30.1 rubles. The strengthening of the ruble was not affected by the situation on the international market, where the dollar continues to rise amid falling oil prices. Yesterday, the US currency was worth $1.49 per euro. Market participants believe that the Central Bank will continue to support the ruble regardless of how the situation in the Caucasus develops in the future and what the dollar and euro quotes will be in the world.
The regulator now has one more task - to prevent a liquidity crisis in the market. Due to financial instability in the world, coupled with the outflow of foreign capital from Russia, the money supply in the market is decreasing. As a result, rates on the interbank lending market now reach 6-8% per annum. “Of course, there is some tension with liquidity; rates are now high,” says Alfa Bank’s managing director for foreign exchange operations, Igor Vasiliev. According to Alexey Ulyukaev, whose words are quoted by the Prime-TASS agency, there will be no liquidity crisis. He explained that the Central Bank will soon be faced with “internal laws” related, in particular, to the payment of VAT, in connection with which “we can expect demand for money at the level of 200-300 billion rubles. per day." Taking into account the set of instruments for providing liquidity that the Central Bank now has, for it, according to Mr. Ulyukaev, it will not be a problem for it to satisfy the needs of banks. “Based on the volume of collateral that we can provide online - repo operations and pawn loans, the Central Bank can provide 1 trillion rubles. in a very short time."
In addition to the Central Bank’s money, there are also budgetary funds that the Ministry of Finance is ready to provide to banks. At yesterday's auction, banks were asked to place 300 billion rubles. for a period of one month at a rate of 8% per annum. The weighted average rate was 8.17% per annum (in applications, banks offered rates in the range of 8--8.5% per annum). The deposit date is August 13th, the return date is September 10th. As is known, auctions for placing temporarily free budget funds on deposits have been held weekly since April 17 to maintain the liquidity of the banking system in a tense situation in the financial markets. At the previous 15 auctions, banks attracted a total of 186 billion rubles for deposits.
“I expected that the volume of allocated budget funds would be greater,” says Nomos Bank Vice President Vasily Fedorov. - The fact that banks attracted less than half of the money offered is a good sign for the market. This means that, despite the events of recent days, financial institutions still have money. These auctions are a kind of anti-crisis measure; as a rule, banks attract budget funds in conditions of lack of liquidity. We can only hope that the Ministry of Finance will continue to provide this money to banks.”
According to Deputy Minister of Finance Dmitry Pankin, there are no fundamental reasons for the lack of liquidity in the market. “Most likely this is just a current surge, it is not based on any serious basic economic processes, and we believe that the situation will be normalized,” said the deputy minister.
Market participants also expect that there will be no systemic liquidity crisis this year. “Of course, there is tension with ruble funds now, and it is possible that this will continue in the future, but we can hardly expect an acute shortage of liquidity,” Mr. Vasiliev believes. Bankers are counting on the Central Bank and the Ministry of Finance to provide money to the market. It is obvious, however, that these funds will become increasingly more expensive for credit institutions, and therefore for their borrowers.