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. Last Updated: 07/27/2016

Kudrin Says Ruble Better Than Dollar

VedomostiFinance Minister Alexei Kudrin
The ruble should gain ground against major currencies in 2005 and the best place for Russians to keep their savings will be in ruble bank deposits, Finance Minister Alexei Kudrin said last week.

Kudrin forecast further weakness in the dollar as the United States will fail to get to grips with its yawning current account deficit in the short term.

"That means the dollar will remain weak or get even weaker for a period of time," Kudrin told state television in an interview aired last Monday.

"Considering the dynamics of the dollar, euro and ruble, I am absolutely confident of my forecast," the minister said.

"It will be more profitable to deposit rubles in banks which pay moderate, sensible rates of interest."

The ruble has rallied strongly since October, with the weak dollar and Russia's booming oil export revenues pressuring the Central Bank to abandon a de facto dollar peg due to mounting inflationary pressures.

Central Bank dollar-buying intervention pushed up inflation last year to nearly 12 percent, above a 10 percent target, and boosted forex and gold reserves to $120 billion -- exceeding Russia's public foreign debt.

Kudrin was an advocate of loosening the Central Bank's grip on the ruble, but has also argued for steady, not sudden, appreciation to preserve what is left of the competitive advantage stemming from Russia's 1998 financial crash.

Reassuring Russians whose confidence was shaken by a banking crisis last summer, Kudrin said there was no chance of a repeat of the 1998 crisis thanks to the creation of an oil-fund budget stabilization fund.

The fund, worth around $20 billion at the end of last year, is earmarked to pay down foreign debt.

"The 1998 default, devaluation, inflation and erosion of wages won't happen in our country thanks to our stabilization fund," Kudrin said.