Risky but right

15 October 2010 By Jason Bush

The decision to widen the rouble’s band is more than a kneejerk reaction to global currency wobbles. It shows the strategy to float the rouble remains on track. But Russia still faces exchange rate dilemmas which won’t be solved until the economy shakes off its oil dependence.

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Russia widened the rouble's floating exchange rate corridor on Oct. 14, increasing it from three roubles to four roubles either side of the central rate. The change suggests new boundaries for the floating corridor at 32.90 and 36.90 roubles against a eurodollar basket. Alexei Ulyukaev, a deputy chairman of the Bank of Russia, said the decision was in line with the bank's commitment to further gradual widening of the floating band.

On Oct. 6, at an IMF meeting in Washington, Russia's deputy economy minister Andrei Klepach said floating the rouble was "a dangerous policy for the economy", saying that exchange rate appreciation could threaten competitiveness.

The rouble is presently at 29.9 roubles to the dollar, 42.2 roubles to the euro, and 35.7 to the eurodollar basket. Since Oct. 1, it has risen 1.9 percent against the dollar but fallen 1.7 percent against the euro.

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