Deputy chairman of the Central Bank of Russia Konstantin Korishchenko
Photo: Grigoriy Sobchenko
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Amplitude of the Ruble and Earth Bubbles
The exchange rate of the currency basket ($0.55+ˆ0.45), calculated by Kommersant according to the official Central Bank rate, is 29.92 rubles today, the same as in April and May of this year. The strengthening of the ruble on June 26 marked the end of the gradually changing rate. After that, the Bank has allowed the ruble to fluctuate within a margin of 1 percent. Since the middle of August, the ruble has been devaluated against the currency basket by 1 percent. It would not be completely accurate to call that the weakening of the ruble. In the last two and a half months, the exchange rate of the ruble has seen movement in the upward direction repeatedly.
By increasing the range of the ruble's fluctuation, the Bank has solved a number of problems. The volatility on the currency market decreases the attractiveness of ruble instruments for speculative investors, its strengthening helps fight inflation, and its weakening locks in the money of speculators who are looking for a way out of the Russian market. The transition to a more market-like mechanism for setting the exchange rate is being accompanied by increasing vague rhetoric from the leadership of the Central Bank. For example, deputy chairman of the Central Bank of Russia Konstantin Korishchenko told a banking “summit” organized by Reuters that the Bank must create a medium in which risks of the strengthening and weakening of the ruble would be balanced. “Now we see certain signs of such a balance, but it is very fragile and the influx or outflow of capital may influence that balance,” he said.
The Central Bank's rhetoric is still far from the mysterious utterances of classical financial forecasting made by for chairman of the U.S. Federal Reserve Board Alan Greenspan. He said the following about a crisis in liquidity on the financial market: “The human race has never found a way to confront bubbles.” That is practically a quotation of Shakespeare, who writes in Macbeth, “The earth hath bubbles as the water has, And these are of them. Whither are they vanished?” Therefore, following the thought of Central Bank officials is comparatively easy. According to Korishchenko, the Bank wants the exchange rate to “fluctuate freely” but, because of widespread fear of devaluations, it intends to “create a certain support to give a certain confidence to the market.”
www.kommersant.com
All the Article in Russian as of Sep. 11, 2007
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