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. Last Updated: 07/27/2016

$3.8Bln Traded as Ruble Strengthens

The ruble rose against the dollar Thursday in very heavy trading, as the market challenged the Central Bank's resolve to cap the currency despite high oil prices and a weaker greenback, dealers said.

More than $3.8 billion traded hands, 10 times more than Wednesday and more than three times the daily average.

Rubles for "tomorrow" delivery rose to 28.765 to the dollar, the price at which the Central Bank was seen buying dollars. Nearly every trade in the session was at that level. Tomorrow rubles were fixed at 28.7811 the previous session.

The Central Bank reins in the ruble, which could otherwise rise on the back of booming oil revenues, to help President Vladimir Putin's pro-growth agenda -- but the market is betting the authorities will give in to appreciation pressure.

"I think the ruble is going to climb," said Interprombank dealer Valery Svinin.

Last month the Central Bank unexpectedly allowed the ruble to climb more than 1 percent against the dollar and many believe there is more to come.

This week Finance Minister Alexei Kudrin said ruble appreciation was necessary to contain inflation, which analysts see at 11 percent this year, a percentage point above the government's target.

"Many people hope the Central Bank will in some way react to the results of the elections in the United States, high oil prices and a rise in the euro," another trader said. "Sooner or later it will happen."

The dollar hit 8 1/2-month lows against the euro Thursday as investors resumed selling the U.S. currency on worries about the country's growing current account deficit in the wake of President George W. Bush's re-election.

Central Bank gold and forex reserves in the week ending Oct. 29 rose $2.1 billion to $107.3 billion, a much smaller rise than the record $5.1 billion jump the previous week, reflecting less dollar-buying intervention.

"We expect the reserves will continue to increase through at least the end of first quarter'' of 2005, said Anastasia Shalina, an analyst at Bank Zenit.

Foreign currency and gold reserves are surging as the Central Bank buys dollars being brought into the country by oil and gas exporters to prevent the ruble from strengthening, which would make imported goods cheaper and hurt domestic producers.

"As long as the Central Bank sticks to its current currency policy" and oil prices are high, the reserves will rise, Shalina said.

 Russia posted a budget surplus of 504.9 billion rubles ($17.5 billion) in the first 10 months of 2004, or 3.7 percent of GDP, a Finance Ministry official said Thursday, quoting preliminary figures.

Spending was 2.242 trillion rubles ($77.9 billion) on income of 2.747 trillion rubles. The government forecasts a surplus of 505.8 billion rubles in 2004, or 3.1 percent of GDP, after high oil prices boosted revenues this year. The surplus was 476.4 billion rubles in January to September, or 3.9 percent of GDP.

The stabilization fund, designed to bail out the budget if oil prices collapse, hit 404.4 billion rubles ($14.1 billion) on Nov. 1 from 349.7 billion rubles Oct. 1.

(Reuters, MT, Bloomberg)