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. Last Updated: 07/27/2016

Ruble Reform Plan Denied

A senior official denied Thursday that the Central Bank was planning a major monetary reform, but commercial banks remained nervous, shaken by a telegram ordering them to transfer all cash rubles to government vaults by June 30.

"Categorically -- there will be no monetary reform," Alexander Khandruyev, first deputy of the Central Bank told Reuters. "We never had, and have no such intentions."

But despite Khandruyev's assurances, banks and businesses said they were uneasy about what was to come, as interest rates soared in response to a shortage of rubles.

"People are nervous and are waiting to see what will happen," said Michael O'Leary, director of sales and marketing at the wholesaler Moscow Cash & Carry Moshaisk.

O'Leary said that some of his company's clients, especially kiosks and small shops, were wary of making purchases and were waiting to see what would happen to prices after the weekend.

"The Central Bank's actions are sparking panic," said Boris Sergeyev, a director of Tokobank, one of Russia's biggest banks. "Everyone is expecting a monetary reform."

"The Central Bank treats us like a herd of sheep," he said. "In the policy of a carrot and a stick, [Central Bank Chairman Tatyana] Paramonova chose a stick."

As the market drained of rubles, overnight credit soared to annualized rates of 600 percent Thursday jumping up from around 60 percent Wednesday, said Andrei Vagin, chief analyst of the interbank credit department with the Russian National Commercial Bank.

"There are many factors that may explain it, and the telegram is one of them," he said. "There are no rubles on the interbank market."

He predicted the rates would continue growing as the ruble weakened against the dollar.

The ruble lost 12 points against the dollar Thursday to close at 4,538 on the Moscow Interbank Currency Exchange, its third successive fall.

But bankers said the shortage of rubles was likely to cause the Russian currency to grow Friday.

"There is a great demand for rubles on the market, and the [ruble's] rise is quite possible," German Vlasov, a dealer with Zoloto Bank told Reuters. "But primarily it all depends on the Central Bank and the financial interests it will find necessary to defend."