Weak rouble prompts Russia to delay plan to replenish sovereign fund
The Russian Finance Ministry said on Tuesday it would postpone foreign currency purchases on the forex market to replenish one of its sovereign wealth funds while the rouble is weakening. The ministry said last month it would transfer 207.6 billion roubles ($5.87 billion) of revenues by February 1 to the Reserve Fund, one of the rainy-day funds in which the government saves windfall energy revenues.
Copyright Reuters, 2014
The shift could pressure the rouble - already trading near record lows due to a sell-off of emerging market assets - as it would involve converting the revenues from roubles into dollars because the wealth fund is dollar-denominated. "When the central bank every day is taming volatility, we certainly will not harm the central bank," Deputy Finance Minister Alexei Moiseev told journalists.
The ministry now expects to convert the cash, freed up by a better-than-expected budget deficit last year, by April 1. The rouble brushed close to its record low in early trading on Tuesday, reaching 41.17 against the dollar-euro currency basket, but had reversed the loss by 1350 GMT when it was up 0.9 against the basket to 40.69. The recent rout in emerging markets on worries about China's economic health and the United States reducing its monetary stimulus have pushed the rouble down nearly 6 percent versus the dollar this year.. Moiseev said he expects the Russian foreign exchange market to stabilise soon. "Traditionally in the first quarter, starting in mid-February, the rouble starts to firm," he said. "It is fully possible that this will happen."