December 13, 2008

Ruble exchange rate to increase in Russia

A Russian Central Bank official said Saturday the banking group will widen exchange rate parameters for the ruble in light of the poor economic conditions.

First Deputy Chairman Alexei Ulyukayev said in an attempt to aid society and business in Russia, the Central Bank is widening the exchange rate of the country's main currency, RIA Novosti reported. It's the fifth such move in a month.

Here there is a political and a philosophical aspect. This is our attitude toward society and business, the formation of trust, Ulyukayev said. We could deftly lighten your pockets, but we are not doing this.

Analysts told MarketWatch the banking group increased how much the currency can depreciate against its dual currency basket. That extension caused a nearly 1 percent decline in the ruble's value Thursday.

Foreign exchange reserves are now below the private sector's gross external liabilities, and a further draining would jeopardize the creditworthiness of the Russian economy, said Lars Rasmussen, an analyst at Danske Bank.

The banking official also assured the public the price of a gallon of oil has likely bottomed out as prices fell below $50 a barrel recently.

The Russian news agency said the Central Bank deputy's comments came a day after the Economic Development and Trade Ministry said the country's economy has been contracting since October, leading to an estimated gross domestic product of 2.6 percent for the fourth quarter.