Russia’s Central Bank widened the ruble’s trading band from Tuesday as part of its policy of switching to a fully free-traded currency, the regulator’s press office said.
“The increase in potential exchange rate flexibility conditioned by these changes will help raise the efficiency of the Bank of Russia's interest rate policy to ensure price stability,” the regulator said in a statement.
The regulator widened the ruble’s trading band against a basket of U.S. dollars and euros from a six- to a seven-ruble corridor, setting it at between 31.65 and 38.65 rubles.
The bank also lowered the level of cumulative intervention before moving the corridor’s boundaries, down to $450 million from $500 million.
The move is in line with the regulator’s policy of gradually switching to inflation targeting in compliance with the guidelines of the single monetary policy for 2012 and for 2013-2014.
The ruble has been under pressure since May in the wake of the escalating eurozone sovereign debt crisis and the slowing of global economic growth, which have pushed down world prices for oil, Russia's key export commodity and a major source of revenues.
The regulator’s decision will increase the ruble’s volatility but reduce pressure on Russia’s international reserves, VTB Capital analyst Maxim Korovin said.
In June, the Central Bank spent $2.2 billion from its reserves to prop up the ruble amid negative external developments.
