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. Last Updated: 07/27/2016

CB: Currency Basket Is Only for Daily Dealings

VedomostiDeputy Central Bank Chairman Konstantin Korishchenko
Russia's new dual currency basket is designed to guide intraday trade and should not be used to predict the ruble's longer-term exchange rate, Deputy Central Bank Chairman Konstantin Korishchenko said Friday.

Earlier this month, the Central Bank said it had started targeting the ruble using a basket made up of 90 U.S. cents and 10 euro cents on Feb. 1, with the share of euros to rise gradually as market players adjust to the new system.

The move was designed to spread ruble volatility between the euro and dollar, and reflect trade flows better. But it sowed confusion in the market.

Analysts were unsure how the basket would work in practice, what volatility the Central Bank considered acceptable, and when and how far the euro proportion might rise.

"If you read the official statement carefully, it stresses that we are talking about using the dual currency basket intraday," Korishchenko said.

"So limits are fixed for intraday fluctuations."

The Central Bank intervenes to iron out sharp moves on the domestic market.

Unlike last year, when it frequently capped the ruble aggressively at a set dollar rate, it has not defended any level for long in 2005.

"Forming any sort of model to use over a week, a month, a year with this basket makes no sense. The levels of fluctuation we have one day will not necessarily spill over into the next day and the day after," Korishchenko added.

This "operational" basket is different from the basket Russia uses to calculate the ruble's real effective exchange rate -- a trade-weighted measure of competitiveness that takes account of inflation.

The exact composition of this basket is not public.