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Russia’s Central Bank continues to loosen the rouble. It has widened the rouble rate fluctuation corridor to the dollar-euro basket from 6 to 7 roubles and cut the volume of interventions that soften these fluctuations.
Vedomosti writes that the corridor is widening starting from Wednesday to 31.65 - 37.65 roubles (the current rate is 35.83 roubles). The CBR simultaneously cuts the volume of interventions, after which by 5 kopecks shifts the boundary of another, narrower (1 rouble) and floating corridor in which the present fluctuations take place.
This will bring the CBR closer to its goal of free rouble rate fluctuation, the regulator explains its decision: greater exchange flexibility will increase the influence of the interest rates by which the CBR currently regulates inflation. And short-term exchange fluctuation, even sharp ones, almost does not affect inflation, according to the CBR leadership. According to CBR Chairman Sergei Ignatyev, he has not noticed that the rouble weakening in August – September 2011 significantly affected inflation. He also does not expect price rises after the May loosening.
“The CBR announcement will exert pressure on the market, giving a signal to greater volatility,” says head of the trading operations department of ING Bank Stanislav Yarushevichus. The corridor widening at first can create possibilities for speculations, agrees analyst from the Alfa Capital management company Vladimir Bragin, but the CBR has shown that it is always present with interventions in order to avoid sharp rate fluctuations.
The rouble’s reaction to the change in oil prices in recent years has become much stronger than earlier, and this is partly explained by the ongoing expansion of the corridor boundaries, confirms Goldman Sachs analyst Clemens Grafe.
The widening of the dual currency corridor by 0.45 euro and 0.55 dollars was justified by the CBR by “a gradual transition to the regime of monetary targeting.”
According to the head of the analytical department of Veles Capital Ivan Manayenko, a tendency for the weakening of the rouble has emerged. “The actions of the Central Bank are a certain cue that the volatility of the markets can be greatly increased, including against the background of the worsening situation in the financial sector. This is the global practice for the Central Bank’s departure from operational management of the exchange rates - we little by little let it go,” added Manayenko. In addition, the Bank of Russia wants to throw off speculators who have already got used to the current rates and are clearly ready to play in the already denoted conditions, Manayenko clarified.