Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Russia's Central Bank Sets Ruble Free

Currencies / Russia Nov 12, 2014 - 05:30 PM GMT

By: Pravda

Currencies

The Central Bank of the Russian Federation canceled the corridor of the currency basket, as well as regular interventions at the boundaries of the corridor and beyond them, an official statement from the Bank said, TASS reports.

"The Bank of Russia, from November 10, 2014, abolished the acting mechanism of exchange rate policy, reversing the interval of admissible values of the bi-currency basket (operating range) and regular interventions at the boundaries of this range and beyond," the statement said.


The new approach of the Bank of Russia to operations on the domestic market does not stipulate complete renunciation of foreign exchange interventions. They can be conducted in case of threats to financial stability in the country.

Thus, the Central Bank of Russia de facto let the ruble float freely, Elvira Nabiullina, the chairwoman of the Central Bank, told Russia 24 TV Channel.

From now on, the formation of the ruble rate will take place under the influence of market factors. The move is supposed to strengthen the effectiveness of the monetary policy of the Central Bank and ensure price stability, says the regulator. It will contribute to quicker adaptation of the national economy to changes in external conditions. To crown it all, it will increase its resilience to adverse shocks, the Central Bank said.

Elvira Nabiullina added that the Bank of Russia temporarily restricted the provision of ruble liquidity to banks to curb speculative demand on foreign exchange market and reduce the pressure on the ruble. "We will temporarily restrict the provision of ruble liquidity, because it is used not only to finance the economy, but also to play on the foreign exchange market," she said.

Finance Minister Anton Siluanov said the bank made a correct decision to refuse from the currency corridor. Later on Monday, the minister said that the decision of the Central Bank was "somewhat belated."

The government of the Russian Federation also supported the decision of the Bank of Russia. "I heartily support this decision. I believe that this is the right thing to do. The Central Bank should have done that before. They should have done that in August," a source from the Cabinet told reporters. In August, when there was no much pressure on the ruble, the refusal fro, the abolition of the corridor would have gone unnoticed. "No one would have noticed that. The rate would have neared its economically justified border and everything would've been fine," the unnamed source said. According to the source, the current fair value of the ruble is around 42-44 rubles per dollar. "If oil prices stabilise and no new sanctions follow, the normal equilibrium rate would be 42-44 rubles per dollar," concluded the source.

The Russian currency market reacted neutrally to the news from the Central Bank, experts say. The dollar and the euro remained at the levels, at which they were before the news about the cancellation of the currency basket corridor. The dollar dropped against the ruble by 1.69 rubles to 44.96 rubles. The euro slid by 1.91 rubles to 56.13 rubles.

The ruble began to strengthen on Monday morning after President Vladimir Putin announced that the ruble was exposed to "significant fluctuations." The president assured that financial authorities of Russia take all necessary measures. He expects that "speculative leaps" of the ruble rate will end soon.

First deputy chairwoman of the Bank of Russia, Ksenia Yudaeva, said that the ruble was hitting all-time record low levels against the dollar and euro because of the actions of currency market speculators. At the same time, representatives of the Central Bank administration have repeatedly declared determination not to leave the currency market by replacing interventions with currency refinancing. This should reduce the burden on foreign exchange reserves of the Central Bank.

Since 2005, the Bank of Russia, as an operational target, has used the ruble value of the so-called dual-currency basket consisting of EUR0.45 and $0.55. Prior to that, the ruble rate was completely tied to the dollar.

The basket was introduced to determine the real exchange rate of the ruble against major world currencies: the US dollar and the euro. At the time of the introduction, the currency basket consisted of 0.1 euro and 0.9 US dollar.

Before May 2008, the Central Bank would intervene in trading only in extreme cases, where currency supplies were too large, and it was inappropriate to allow a stronger ruble, or vice versa, when demand for currency is too large and it was inappropriate to allow a sudden weakening of the ruble.

After the crisis of 2008-2009, the Central Bank began to gradually push the boundaries of the floating corridor, while reduces all types of interventions with an intention to fully focus on the control of inflation.

In October and November of 2014, due to considerable growth of international currencies vs. the ruble, the Bank of Russia moved the boundaries of the dual currency corridor several times. On October 6, 2014, the currency basket reached a maximum level of 46 rubles. On November 6, the currency basket rose to more than 51 rubles.

Pravda.ru

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Pravda Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in