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Ruble Hits 4-Year High Versus Dollar
The Moscow Times
Thursday, November 25, 2004
http://www.themoscowtimes.com/stories/2004/11/25/041.html
The ruble shot to its highest level against the dollar
Wednesday on speculation that the Central Bank is
letting the currency appreciate in an effort to slow
inflation.
The ruble rose 0.4 percent against the dollar to
28.40, its highest since January 2001. The
currency has gained nearly 3 percent versus the
ailing greenback this year.
"It looks like the Central Bank is staying out of
the market," said Igor Vasilyev, director of
financial markets at Alfa Bank in Moscow. The
Central Bank controls the value of its currency
by buying and selling dollars.
The Central Bank expects the rate of inflation will
be about 11 percent this year and fall to about 8
percent in 2005. The bank's original target was to
slow inflation to 10 percent this year, from 12
percent in 2003.
The gains came after Central Bank First Deputy
Chairman Alexei Ulyukayev said Tuesday that
every 1 cent move down by the dollar against
the euro roughly translated into a 10-to-15
kopek move up by the ruble against the U.S.
currency.
"Basically, Ulyukayev gave the market an
indication that the Central Bank would not be
resisting further appreciation in the next few
weeks," said UralSib brokerage senior
economist Vladimir Tikhomirov.
Record prices for Russia's chief export, oil, put
upward pressure on the ruble, but the Central
Bank has tried to stem its rise to keep exports
competitive.
The downtrend of the dollar against the ruble "will
remain if the dollar does not correct against the
euro," said Alfa Bank dealer Alexei Bukleyev.
The dollar plumbed a record low against the euro
on Wednesday, as news that Russia may consider
boosting the share of euros in its vast foreign
currency reserves gave traders another reason to
dump the currency.
The dollar, which fell below $1.313 per euro, met
with fresh selling when Ulyukayev said he saw no
reason for the dollar to appreciate and that the
bank was reviewing its forex reserves "with the
highest priority."
"The comments from Russia yesterday -- that's a
big thing for sentiment right now," said Paul
Mackel, foreign exchange strategist at ABN AMRO.
"Any story that the market can put a
dollar-negative spin on is welcome."
Speculation swirled in the market that the Central
Bank could further increase the share of euros in
its $110 billion-plus reserves. Euros already
account for around a quarter of the reserves,
compared with 10 percent two years ago.
Windfall revenue from oil and gas exports is flooding
Russia with foreign currency, driving the ruble higher.
The nation, the world's No. 2 oil exporter after Saudi
Arabia, is seeking to cap inflation while preventing
the ruble's strength from stalling the longest
economic expansion since the fall of the Soviet
Union.
"The only way to fight inflation is to let the ruble
appreciate," said Dmitry Shemetilo, an
emerging-markets strategist at Commerzbank in
London. "The Central Bank is moving toward
inflation targeting."
The bank's estimate that inflation will be about 11
percent this year "isn't realistic," Shemetilo said.
Policymakers may let the currency gain to as much
as 27 per dollar by the first quarter of next year, he
said.
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