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. Last Updated: 07/27/2016

Central Bank Slows Ruble’s Record Rise

The ruble posted a record monthly gain versus a dual currency basket Wednesday, with the Central Bank moving its intervention level to allow a creeping appreciation while avoiding high volatility.

The Central Bank bought a little more than $600 million as part of its policy to limit excessive exchange rate swings, Chairman Sergei Ignatyev said.

The ruble closed in regular trading at 36.29 versus the basket, taking its gains for September to 5.3 percent for its best month since the current composition of 55 cents and 45 euro cents was set in 2007.

During the session, it set a nine-month high of 36.23. Dealers said the Central Bank intervened at about the 36.25 mark, having gradually moved the level from the 36.40 at which it entered at the end of last week.

Ignatyev said the regulator had stuck by its policy to allow the ruble’s floating corridor to move by 5 kopeks after each $700 million of interventions, as it had done in the summer.

“We have not changed it. It remains $700 million. But we do not make any promises to make an announcement when we do change it,” he told reporters.

The floating corridor is 3 rubles in width and is located within a set 26 ruble to 41 ruble trading band, which Ignatyev said the Central Bank had no plans to scrap for now, even though it remains committed to moving to a free float in the next few years.

The ruble has now clawed back about 40 percent of the depreciation experienced in late 2008 to early 2009 as the country slipped into recession, hurt by a slump in oil prices.

Central Bank First Deputy Chairman Alexei Ulyukayev said Tuesday that he was worried about volatility rather than the current rate, and dealers said such comments gave the market confidence to push the ruble stronger.

“Yesterday, [investors] tried to strengthen the ruble, move the Central Bank’s bid, and it worked. Having seen that it is possible and having evaluated the risks, the ‘elephants’ have started to come in — the big guys, like hedge funds, asset managers,” said Alexei Borichev, a dealer at ING.

The ruble closed at 30.06 per dollar, its best monthly performance since May, with gains of more than 6 percent.

One-year nondeliverable forwards show the market is more upbeat on prospects for the ruble against the dollar than at any time since last fall. But at 32.70 rubles per dollar, the NDFs nonetheless point to the currency weakening — if only slightly — on the 12-month horizon.

Goldman Sachs suggests taking profits on ruble longs.

“Further appreciation seems possible, given the global cyclical environment and carry. But given the decent move in recent weeks and the ongoing Central Bank dovishness, we think the downside risks to the ruble have increased in the near term,” its analysts said in a note.