The Central Bank of Russia widened its trading band against the dollar/euro basket on January 16, a source in the bank told RBC, without specifying the new band.
Judging from operations on the MICEX, however, it has been expanded by almost RUB 0.5, from RUB 36.76 to RUB 37.22.
This means that the dollar is set to rise further against the ruble on the MICEX, following a RUB 0.37 increase on Thursday, to 32.22 RUB/USD. Similarly, the euro climbed to 42.55 RUB/EUR yesterday. The Central Bank’s official exchange rates for today are 32.2135 RUB/USD and 42.3833 RUB/EUR.
This is the fifth time this week alone that the Central Bank has expanded the ruble’s trading band. The Russian currency has lost more than 20 percent of its value against the dollar/euro basket since September 2008.
The speed of the ruble’s devaluation defies all forecasts. Most analysts expected the ruble to stand at between RUB 36 and RUB 37 against the dollar/euro basket in February 2009, but this level may be reached over the next few days.
At the same time, Central Bank Senior Deputy Chairman Alexei Ulyukayev assures that the Central Bank is not going to surrender control of the ruble’s exchange rate against the dollar/euro basket. “We will not let the ruble go into free floating, but we will expand its trading band against the dollar/euro basket. The band will be wide enough, so it will be half or quasi free-floating,” he specified.
The broad trading band will allow the Central Bank to implement fundamental tendencies. “We should not go against them, but we will correct them. If the ruble was devalued sharply, the situation would be completely different. And by expanding the ruble’s trading band gradually we have won time to avoid panic,” Ulyukayev stressed.
