NBU reserves edge 1.4% lower in January

The National Bank of Ukraine’s gross international reserves declined 1.4% mom (or by USD 430 mln) to USD 31.4 bln in January, the central bank reported yesterday.

Svetlana Rekrut: Given that the government raised USD 144 mln via the sale of USD-denominated bonds last month and the positive effect of currency revaluation of reserves amounted to USD 120-160 mln, we estimate the NBU sold net USD 700-750 mln in January, after the FX market stayed broadly balanced in December. Given that the NBU stayed out of the market for most of the month, it likely sold foreign currency directly to Naftogaz. We think NBU reserves might decline by about USD 1.0 bln in February, mainly because of repayment of USD 580 mln of IMF debt provided back in 2008. The data from January does not change our view on FX market prospects for 2012. We continue to believe the NBU will stick to its current policy priority of keeping the UAH/USD exchange rate stable, and we estimate it might cost the central bank up to USD 7.0 bln in reserves in 2012.