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. Last Updated: 07/27/2016

Central Bank to Buy More Euros Next Year

VedomostiAlexei Ulyukayev
The Central Bank may slightly raise the euro portion of its hard currency reserves next year and cut the dollar component, a Central Bank official was quoted by Interfax as saying Wednesday.

"I think that next year we may revise the structure of the gold and hard currency reserves to increase the euro portion by some extent and to diminish dollar assets," First Deputy Central Bank Chairman Alexei Ulyukayev was quoted as saying.

"But we shall not take any drastic steps. Everything will happen gradually, without hurry, very carefully and with circumspection."

Currently, the Central Bank's reserves of $89.6 billion consist of 70 percent dollars, 25 percent euros and 5 percent in other currencies.

Central Bank governor Sergei Ignatyev said last week he expected the reserves to reach $100 billion by the end of the year. The reserves are boosted by a strong inflow of dollars due to high prices for oil exports.

Monetary authorities signaled a shift in their exchange rate targeting earlier this year to focus on the euro as well as the dollar, but have been ambiguous over how the twin currency basket works in practice.

Exporters, which also include metals firms, must sell 25 percent of their export revenues at home to help the Central Bank prop up the ruble.

The ruble rate to the dollar appreciated 5.1 percent in real terms in the first 7 months of the year with the Central Bank targeting an appreciation of no more than 7 percent for the whole of 2004.

Ulyukayev said the Central Bank did not plan to cut the volume of obligatory dollar sales for exporters soon.

"We do not plan to put the issue to the Central Bank board of directors until the end of the year," he said.

No changes are expected in the volume of funds banks are required to deposit at the Central Bank. The Central Bank cut the minimum reserve requirement to 3.5 percent from 7 percent in July during a banking mini-crisis to inject liquidity into the system.

Analysts have said the measure boosted money supply and threatens the government's 2004 inflation target of 10 percent.

Ulyukayev acknowledged the Central Bank had overshot in cutting the reserve requirement, but said it did not intend to reverse the move.

"It is not very good practice when we take a step toward liberalization but pull back later," he said. "The decision is a key one, it is well-considered and fits our general policy of easing the burden on the banking sector."