Agence France Presse

Moscow, February 4:

The Russian central bank said on Friday that it had begun including the euro along with the dollar in determining the “real” exchange rate for the ruble which continues to rise against the greenback. The bank said in a statement that it had begun using a dual currency basket make up of 90 US cents and 10 euro cents on February 1 and would raise the euro’s share with time. “A coming increase of the euro’s share in the currency basket to a level appropriate for a fair exchange rate will be undertaken gradually by the Central Bank as market players adapt,” the bank said in a statement.

A central bank source said that the decision did not mean that the Russian bank would increase the share of euros in its reserves or mean that the bank would start trading more actively on the European currency’s Moscow market. “This is only being done to determine the real, effective cost of the ruble to understand the rubles true cost through a complicated mathematical equation,” the bank source said. “This won’t affect real life, but market players may notice that the euro may start fluctuating slightly less and the dollar slightly more.”

Analysts said the decision was reached in part because the ruble had appreciated in real terms against the dollar as the economy attracted dollars on the back of growing returns from oil and natural gas sales. The bank had intervened heavily on the forex market in recent months, buying up the dollar to ease the ruble’s appreciation, and some analysts said that the central bank had reached a decision to abandon that policy. Others said that the euro’s share of the basket may grow to up to a half in the coming months.

The central bank said that its attempts to keep the ruble-dollar exchange rates level had led to wild fluctuations of the exchange rates of other currencies like the euro, hurting the country’s trade forecasts. Russians have used the dollar as the country’s second currency since the Soviet Union’s collapse and one Moscow official recently said that there were more dollars circulating in Russia than in any country outside the United States.

But trade has blossomed with Europe in recent years, with only a volatile exchange rate standing in the way. “Considering the European Union’s new role in Russia’s foreign trade relations, and the euros growth among the world’s leading currencies, the existing ‘dollar approach’ has stopped corresponding to the interests of the Central Bank’s policy,” the statement said.