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. Last Updated: 07/27/2016

Ruble Fall Said Unlikely Ahead of June Elections

The ruble is unlikely to weaken significantly in the first half of this year despite June's presidential election, following its stabilization in the second half of 1995, dealers said Wednesday.


Dealers said the state had enough resources to keep the ruble within the 4,550 to 5,150 per dollar corridor to the end of June, but fears ahead of the presidential election June 16 could be a tough challenge for the currency.


"The ruble is sure to fall, but the main question is how much and how fast," said Promradtekhbank dealer Alexei Kaplun.


"The problem is that now it is difficult to forecast how expectations of the election results will be reflected in the ruble rate."


The Central Bank is depreciating the ruble slowly to compensate for inflation, but it has by and large stabilized the currency since mid-1995 compared with earlier fluctuations.


The authorities limited the ruble to a 4,300 to 4,900 per dollar corridor in early July, which was adjusted downward for the first half of this year.


The ruble edged downWednesday to a seven-month low of 4,670 per dollar on the Moscow Interbank Currency Exchange (MICEX) from 4,668 Tuesday, and was trading on the interbank market at around 4,665.


On the Moscow Commodities Exchange, futures contracts for July delivery were trading Wednesday at 5,092.0, just within the corridor.


Fears that the ruble could fall sharply ahead of the expected communist victory in December's parliamentary election failed to materialize, dealers noted.


"The Central Bank has full control over the currency exchange and interbank market, and the ruble will stay within the new range if the same team has the power," said Neftekhimbank dealer Vladimir Zrazhevsky.


The head of the Central Bank has also made it clear he does not expect the ruble to weaken sharply.


"A stable ruble, backed decisively by the Central Bank, is certainly possible in the second half of 1996, regardless of the technical means we use," Sergei Dubinin said Wednesday.


It was premature to discuss the fate of the corridor, but the bank could use other means to control the ruble, he said.


Economics Minister Yevgeny Yasin suggested earlier this month the corridor will be replaced in July if the foreign exchange market is stable and inflation is under control.


Dealers said the ruble could be allowed to fluctuate within a percentage band around a fixed rate, instead of running within the current corridor range. The ruble could come under some pressure in the run-up to the presidential election, which is more important than last month's parliamentary vote, dealers said.


"Much will depend on political news in this period of uncertainty. The ruble is likely to ease because it is known that in unstable situations dollars are preferred," said Aljba Alliance Bank chief dealer Dmitry Slobodnik.