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In July the Russian currency market was under the impact of specific domestic factors
In July the Russian currency market was under the impact of specific domestic factors, says the financial market review published by the Bank of Russia on Tuesday. Throughout most of the month, they explained the lack of reaction of the Russian currency market to the foreign economic situation. In July the official ruble/dollar rate subsided by 0.26 percent against the background of high activity of participants on the foreign exchange market. The Central Bank notes that, on results of the month, the MICEX average daily ruble-U.S. dollar turnover increased by 15 percent from June. At the same time, in July the aggregate average-daily turnover of conversion transactions fell by 19 percent to 15.1 billion dollars in comparison with the month before. This was prompted by tension on the monetary market, the Central Bank says. At the same time, the volume of ruble-euro conversion transactions increased in July by 26 percent to 190 million dollars. The Central Bank describes the Russian currency market as "relatively stable" in early July: the dollar-ruble rate remained within the 29.03-29.04 rubles-to-the-dollar range. Against the background of tensions in the banking sector and seeking its stabilization, the Central Bank on July 8 lowered the obligatory-reserve norm to 3.5 percent. According to the review's figures, this step brought an additional inflow of about 115 billion rubles to the banking sector. The Central Bank says that, against the background of growing liquidity of the banking sector, the cost of the American currency increased in ruble terms by 9 kopecks to 29.13 rubles to the dollar on July 7 through 13. The demand for foreign currency by the non-financial sector of the economy did its share, the review notes. The Central Bank maintains that it "did not prevent the lowering rate of the national currency and refrained from intervention in the middle of the month," though resumed foreign-currency purchases on the domestic market in the second half of July. During the period, the dollar/ruble rate stabilized at the 29.08-29.09 rubles to the dollar. The growing foreign currency supply was due to the inflow of export earnings in July, standing at 3.5 billion dollars in the Central Bank estimate, as well as large payments to the budget in the second half of July. "The strengthening of the American currency in the closing days of July explains the demand for U.S. dollars, as a result of which the official rate of the American dollar against the ruble was fixed in the last working day of July at 29.1 rubles against the dollar," the review reads.
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