Belarusian central bank to reduce forex market intervention in H2
MINSK. Aug 6 (Interfax) - The National Bank of Belarus plans to scale back its presence on the forex market in the second half of 2012, the central bank's first deputy chairman, Yury Alymov told Interfax.
"The current flexible mechanism of exchange rate formation will be maintained in future, but the National Bank intends to gradually reduce its presence on the forex market. As a result, the stability of the national currency's exchange rate will for the most part depend on the deliberateness and balance of macroeconomic, monetary and fiscal policies," Alymov said.
He recalled that the NBB purchased foreign currency in the first half of 2012 in order to prevent excessive strengthening of the Belarusian ruble. The central bank bought the equivalent of Br9.6 trillion in the first half.
"The National Bank is inhibiting substantial strengthening of the Belarusian ruble's exchange rate under the influence of foreign currency supply exceeding demand in order to prevent a significant decline in the price competitiveness of domestic producers on foreign markets and, consequently, the deterioration of foreign trade," Alymov said.
The "devaluation of the Belarusian ruble, along with the implementation of a set of economic policy measures in 2011-2012 made it possible to significantly increase the price competitiveness of Belarusian goods, both on the foreign and domestic markets, he said. As a result, the country's foreign trade surplus widened to $3 billion in the first five months of 2012 from $2 billion in the same period of 2011.
"Considering the current mechanism of exchange rate formation, future changes in the Belarusian ruble's exchange rate against the U.S. dollar and any other currency will largely depend on the effectiveness of the foreign economic activities of Belarusian companies, as well as fluctuations in the reciprocal exchange rates of the main world currencies on the international financial market,' Alymov said.
The Belarusian ruble appreciated by 2.66% against a basket of currencies in the first seven months of 2012 after going into a free fall in 2011.
The NBB has radically changed its exchange rate policy since October 2011, scrapping a target exchange rate corridor for the Belarusian ruble that led to the depletion of reserves when there was a foreign trade deficit. The new policy amounts to a managed floating rate where the NBB only smooths out sharp fluctuations in the exchange rate by either buying or selling foreign currency.
The official exchange rate for August 3 was Br8,320/$1.