According to Reuters, the CBR attributed its decent international reserves bounce to a favorable mark-to-market effect and a positive balance of FX flows with banks. Indeed, DXY weakened near 0.6% between 20 and 27 March (the reporting dates for international reserve data); however, this is too small to explain the increase in reserves on its own.
Meanwhile, we highlight that the volume of the CBR’s FX repo had actually increased USD 935mn for the said period, but at the same time there was USD 4.3bn of FX 312-P refinancing debt outstanding as of 20 March. Under that facility, the CBR provides FX liquidity against FX loans to exporters. Meantime, banks can repay 312-P loans early at their discretion (unlike the repo facility). Therefore, we believe that some banks likely paid down large chunks (if not all) of their FX 312-P debts to the CBR last week. The regulator reports outstanding 312-P volumes only for RUB operations.
If our view on this matter holds true, it would be yet another illustration that the domestic interbank FX liquidity situation has improved visibly. This is positive for the FX spot market, but is likely already reflected in the prices.