Previously, the country's monetary authorities used ruble appreciation as an effective way to contain inflation. But this instrument has recently started to do more harm than good, as a strong ruble attracts currency speculators and is damaging to national producers.
In fact, the Central Bank does not need to do anything to strengthen the ruble. A positive trade balance ensures the inflow of foreign currency, mainly due to a favorable situation on the market for commodities and energy. Their export earns Russia more money than Russians are prepared to pay for imported goods.
Therefore, the dynamics of ruble appreciation compared with the U.S. dollar, in which the bulk of Russian export is nominated, is a natural feature.
The Russian Central Bank mainly tried in the last few years to prevent the dollar exchange rate from plummeting to purchasing power parity with the ruble.
The International Monetary Fund said in its latest World Economic Outlook 2007 that the dollar should cost 15.8 rubles, provided the state stops its interference in the exchange rate.
The Central Bank argues that an uncontrolled strengthening of the national currency to almost double its current value now would destroy the Russian financial system and industry. The trouble is that the commodities sector accounts for an excessive share of export-import transactions.
Russia mainly exports commodities and imports equipment and consumer goods.
The exchange rate of the ruble has strengthened 20% against the dollar (in nominal value) in the last five years. The positive effect was that many enterprises earned the money to buy foreign-made equipment.
But now the strong ruble is becoming increasingly dangerous to industry by making imported goods more accessible to the people. Business outlays are growing, including spending on wages and electricity, with ruble appreciation further complicating the situation.
Russian producers find it increasingly difficult to compete against imported goods.
To manage a smooth decline of the exchange rate of the ruble, the Central Bank used currency interventions to contain the inflow of dollars. This is why its gold and foreign currency reserves have reached a record-high figure of $420.2 billion as of August 16. (These reserves were worth $10.9 billion in September 1998, after the financial collapse the month before.)
The country's main financial regulator sometimes allowed the ruble to grow stronger.
Ulyukayev said: "Ruble strengthening against the bi-currency basket is an effective measure against inflation. I don't think we have used it too often [this year]. In January and February 2006, we used this instrument five times."
The Central Bank let the ruble go its own way only three times this year, including in early August, when it allowed the ruble to gain 0.5% against the bi-currency basket, in which the U.S. dollar accounts for 55% and the euro for 45%.
The bank is being torn between a desire to help Russian manufacturers exploit the weak ruble, and the need to gradually strengthen the ruble in line with current trends on the currency market.
Early this year, Sergei Ignatyev, chairman of the Central Bank, said that ruble appreciation would slow down industrial growth and promised to refrain from raising the nominal exchange rate of the ruble in the next few months. He said the regulator would use other available instruments.
However, the bank allowed the real effective exchange rate of the ruble to grow stronger several times, so as to allow the government to keep inflation in check.
This year, inflation in Russia should not exceed 8%.
On the other hand, the choice between letting the ruble grow and restraining it may soon become meaningless.
Import has been growing at an increasing pace this year, which is rapidly reducing the positive payments balance. The ruble may start weakening against the bi-currency basket in the medium term, giving the Central Bank a chance to fulfill its promises - and make new ones.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
