Market Blamed for Ruble Volatility

Recent moves in the exchange rate of the ruble have been caused by market players and not by the Central Bank's currency market operations, Central Bank Deputy Chairman Konstantin Korishchenko said Tuesday.

"If there is a feeling that there is an unusual situation or behavior on the currency market, then to find the reason you have to look not at the conduct of the Central Bank, but of market participants," Korishchenko said.

Traders and analysts have noted that the ruble's exchange against the Central Bank's dollar-euro currency basket has become more fluid since the bank allowed a one-off revaluation by 0.5 percent on June 26.

The ruble was up Tuesday by 0.16 percent against the basket, comprising 55 cents and 45 euro cents, bringing its total gains for the year to date to almost 1 percent.

The Central Bank has been walking a tightrope as it tries to counter appreciation pressures on the ruble stemming from booming prices for oil, and burgeoning capital inflows that hit $67 billion from January to June. At the same time, its dollar-buying intervention is stoking consumer prices, which rose 1 percent in June and have risen 8.5 percent over the past 12 months.

Despite the poor June numbers, Deputy Prime Minister Alexander Zhukov forecast that price growth from July through August would be broadly in line with recent years and saw no reason to change the government's 8 percent full-year forecast.

Tuesday's modest ruble gains followed a bout of weakness on Friday that some market players attributed to an attempt by the Central Bank to burn speculators profiting from a one-way bet on ruble appreciation.

Stanislav Ponomarenko, a market analyst at ING, said Friday's move was driven by a large market player and had spooked a lot of dealers who have been betting on further ruble appreciation.

Despite the volatility, Ponomarenko said he expected the Central Bank to stand by its targeting of the dollar-euro basket. "That's its only credible weapon against inflation," he said.

Korishchenko, the Central Bank's point man for day-to-day currency operations, said the volatility was market driven, as indicated by activity in currency swaps. "Take turnover on the swap market as one indicator -- the more open swap positions there are, the more they have bought or sold currency they don't own," he said. "This is, in crude terms, major speculation."

He declined to say whether the Central Bank would allow the ruble to appreciate further. "I won't directly, or indirectly, confirm or deny this," he said.