The Central Bank allowed the ruble to scale fresh highs versus a dollar-euro basket on Wednesday but said it would consider “soft” measures to limit future speculative inflows into the country.
The ruble has firmed 9 percent versus the basket since September to 35.03, its strongest since January, as investors regain confidence in emerging markets, the domestic economy starts to recover from recession and oil prices hold near one-year highs.
“I am against resuming capital-control measures. At the same time, there are other measures, softer ones, which could slow down the inflow of speculative capital. … It is being discussed,” Central Bank Chairman Sergei Ignatyev told reporters Wednesday.
Such measures could include monitoring external borrowing of state-controlled companies, as well as reintroducing differentiated minimum reserve requirements for banks’ liabilities in foreign currency versus those in the ruble, he added.
Currently the Central Bank allows the ruble’s floating corridor to shift by 5 kopeks for each $700 million of interventions at either of the band’s boundaries. Dealers say the latest intervention level is at 35.00 against the basket.
Ignatyev said earlier Wednesday that the Central Bank had bought $6 billion in currency market interventions between Nov. 1 and Nov. 17, after purchases of more than $15 billion last month.
“The order of interventions may change. … It is possible that the floating [ruble] corridor could be altered not just automatically,” Ignatyev told reporters later.
He reiterated, however, that Russia’s long-term goal remains to move to a floating exchange rate and inflation targeting. “By my estimates, it will take 1 1/2 years, possibly two. And possibly it will not be an absolutely clean float,” he said.
Officials have previously said the Central Bank intends to reserve the right to intervene in the currency market if it deems it necessary even after the free float.
Another factor that could discourage capital inflows and cap the ruble’s rally would be further interest rate cuts.
Ignatyev reiterated the likelihood of more monetary easing to come, saying the benchmark refinancing rate could be cut to less than an annualized 9 percent next year from 9.5 percent currently.
The minimum one-day repo rate, now at 6.75 percent, will be reduced more slowly than the refi, he added. The daily repo auctions have been the Central Bank’s chief tool for providing short-term liquidity to the banking sector.
Ignatyev also said lenders’ nonperforming loans had almost peaked and borrowing costs on their debt may return to precrisis levels next year.
“If what happened in September 2008 doesn’t occur again, the banking sector will not have problems with capital,” he said. “Only individual banks will have problems.”
Ignatyev said lending might start to grow this year, adding that he “wouldn’t be surprised” if lending increased 15 percent in 2010.
(Reuters, Bloomberg)