OREANDA-NEWS. October 15, 2010. CBR cancelled a broad corridor for exchange rate fluctuations of RUB26-41/basket, which it introduced in January 2009. However, the ‘floating corridor’ has been left in place, though its limits were expanded from RUB33.3-36.3/basket to RUB32.8-36.8/basket, reported the press-centre of OTKRITIE Financial Corporation.

The mechanism of CBR currency interventions was also modified, with the volume limit of accumulated interventions before allowing a 5-kopeck move in the basket now cut from USD700m to USD 650m. CBR First Deputy Chairman Aleksey Ulyukaev said that the bank will also continue to make 'technical' interventions within the new corridor, approximately after every 50-kopeck move in the basket.

View: Expanding the corridor will increase volatility of the RUB rate and could allow CBR to reduce its presence on the currency market. This could also lower the costs of CBR’s response to the building of appreciation pressures on the ruble: with oil now trading above USD 80/bbl and market sentiment improving, we could see a resumption of capital and current account inflows into Russia.

Ulyukaev noted that the bank expects to see a resumption of net capital inflows in 4Q10. Recent acceleration in inflation is yet another important factor that could have pushed CBR to allow more flexibility in the exchange rate. According to Rosstat, as of 11 October CPI in Russia was running at 7.3% YoY, with the maximum official limit for the year set at 8%. We reiterate our positive view on the ruble at RUB33/basket by year’s end.