On parameters of Bank of Russia exchange rate policy

Effective from 17 June 2014, the Bank of Russia adjusted the parameters of the exchange rate policy mechanism to further increase exchange rate flexibility of the rouble in context of the transition to inflation targeting.

Amid decreased volatility observed on the domestic foreign exchange market and lower financial stability risks, the Bank of Russia implemented the following adjustments of parameters of the exchange rate policy mechanism.

— The cumulative volume of FX interventions, which lead to the shift of the floating operational band’s boundaries by 5 kopecks, was decreased from $1,500 mln. to $1,000 mln.

— FX intervention volumes aimed at smoothing the volatility of the rouble exchange rate was decreased by $100 mln. in the internal ranges of the floating operational band.

Resulting the adjustments in the floating operational band, the range where the Bank of Russia does not implement the FX interventions to smooth the volatility of the rouble exchange rate was increased from 3.1 to 5.1 roubles (with consideration of the “technical” range), at the same time the total range of the floating operational band of acceptable value of the dual currency basket in roubles (7 roubles) was retained.

Taking into account that the current value of the dual currency basket is in the neutral range of the floating operational band (in which there is no FX intervention to smooth the volatility of the rouble exchange rate), this decision will not have significant impact on current rouble fluctuations.

* “+” means foreign currency purchase, “−” means foreign currency sale.

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