Tag Archives: Alex Nicholson

Russian Central Bank spent $58 billion backing Ruble (Update1)

Posted on by


[Skip to the end]

Russian Central Bank Spent $58 Billion Backing Ruble (Update1)

By Alex Nicholson and Maria Levitov

Nov. 19 (Bloomberg) — Russia’s central bank spent $57.5 billion defending the ruble in September and October, Chairman Sergey Ignatiev said.

Why would they ‘defend’ the ruble? Maybe they ‘defend’ it selectively, via transactions with ‘insiders’ moving from rubles to dollars?

Russia held 45 percent of its reserves in U.S. dollars, 44 percent in euros, 10 percent in pounds and about 1 percent in yen on Nov. 1, Ignatiev, said in the lower house of parliament in Moscow today.

“Russia ensures the stability of its currency, given the fundamental indicators of our economy,” Finance Minister Alexei Kudrin told lawmakers today. The amount of reserves ensures “a firm foundation for macroeconomic stability, for stability of the national currency,” he added.

Looks like I’m wrong on suspecting insider conversion. Sorry!!!

Russia’s international reserves stood at $475.4 billion as of Nov. 7, the third-biggest after China’s and Japan’s. They have fallen $122.7 billion since Aug. 8 as the central bank shored up the ruble. The bank buys and sells currency to keep it within a trading band against a dollar-euro basket to limit the impact of exchange-rate fluctuations on the economy.

Right, that’s the reason…

Ignatiev also said that the central bank reduced its holdings of Fannie Mae and Freddie Mac bonds, which are held by Russian oil funds that are part of the reserves, to $20.9 billion on Nov. 1 from $65.6 billion on Jan. 1.

Explains some of the spread widening.

Fannie and Freddie were “taken under state control” in the U.S. in September, guaranteeing their reliability, Ignatiev said. The bank isn’t currently selling bonds of the two U.S. mortgage- finance companies, he said.

Right, not even if an insider wants to buy them with rubles.


[top]

Share

Bloomberg: Russian Oil Fund Should Be Tapped for Pensions

Posted on by

While relatively small, investing in pensions vs. ‘spending’ reduces aggregate demand. And ‘liquidity’ for the banking sector can readily be increased independently of these funds as needed.

Russian Oil Fund Should Be Tapped for Pensions, Kudrin Says

by Maria Levitov and Alex Nicholson

(Bloomberg) Russia’s Finance Minister Alexei Kudrin said the country’s oil fund should be used for financing pensions rather than boosting liquidity in the banking sector.

“The fund should not ensure liquidity. This is not its aim,” Kudrin said in Moscow today. Investing the $33 billion National Wellbeing Fund abroad and using returns to finance pensions is “the only correct way to use the National Wellbeing Fund,” he said. The government would always help to restore liquidity if this was required, he said.

Russia will eventually invest a small portion of the National Wellbeing Fund on the domestic market, once it becomes more stable and less dependent on oil prices, Kudrin said. Five percent of the fund may be invested in Russian securities “in the future” and that amount could gradually be increased he said.

The fund will not be invested in the Russian market this year, he said.

Share