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. Last Updated: 07/27/2016

CB Official Talks Up Ruble

The ruble is undervalued compared with its peers and should strengthen significantly, a deputy Central Bank chairman said in an interview published in the weekly Itogi magazine.

"One has to understand that we live in an era of a strengthening ruble," said central bank Deputy Chairman Alexei Ulyukayev.

He said he saw the ruble strengthening in real effective terms by up to 11 percent per year for the next few years without inflicting much damage on the economy.

The ruble appreciated by 10.5 percent in 2005, a sharp rise from 4.7 percent in 2004. The Central Bank said last year that it would gradually phase out targeting the ruble's real effective exchange rate. Ulyukayev said he believed the ruble was valued at between 1.5 and two times below its real worth.

Russia is struggling to smooth the negative effects of massive foreign currency inflows as oil exporters sell their petrodollars.

With inflation running in the double digits and the Central Bank keeping the nominal exchange rate stable, the ruble's real effective exchange rate -- a competitiveness gauge calculated using nominal exchange rates and price levels in Russia and its trading partners -- is growing fast.

Economists say domestic producers are suffering from rising costs at home as the ruble appreciates.

But Ulyukayev said the strong ruble only hurts those companies whose products compete internationally, and these are very few. Ulyukayev said sectors like Russia's struggling car industry, which saw its sales fall below foreign car sales for the first time in 2005, are suffering from the strengthening ruble.