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21.12.2012

Foreign currency panic buying in expectation of devaluation 27

11:46, — Economics

Foreign currency panic buying in expectation of devaluation

Panic buying of foreign cash in Belarus has been caused by a sharp growth of offered rates in the interbank market.

The traditional demand for foreign currency in Belarus ahead of Christmas and New Year's Day amid devaluation expectations in the first days of 2013 became the reason for the ruble liquidity shortage in the interbank market of Belarus.

Interest rates in the market have soared by almost 17 percentage points for 10 days: the weighted average AFN overnight rate increased to 37.63% on December 20 from 20.9% on December 11.

According to the statistics of the National Bank of Belarus, the ruble liquidity shortage is growing in the market. The liquidity shortage rose from 439 billion rubles on Wednesday to 1 trillion on Thursday and 2.032 trillion on Friday morning, December 21.

The ruble deficit can to some extent be explained by the credit activity of banks at the end of the financial year. The main reason however is the traditional demand for foreign cash ( in foreign exchange offices) in anticipation of a devaluation in the first days of 2013 amid the total lack of confidence in government's promises after a one-time 20% ruble devaluation on January 1, 2009, and a nearly 300% devaluation of the national currency in 2011.

Besides, market participants notice the increased demand of economic entities for foreign currency, which was cased by the end of the financial year and the need to pay for energy, component parts, raw materials, etc.


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