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Russia's forex policy will exclude losses similar to 1998 crisis

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MOSCOW, December 24 (RIA Novosti) - Russia's foreign exchange policy will avoid the losses that resulted from the ruble's sharp devaluation during the 1998 financial crisis, President Dmitry Medvedev said on Wednesday.

At the same time, Medvedev said in an interview with leading Russian TV channels that the ruble's exchange rate should be more flexible to reflect the real economic situation.

Some economists have argued of late that Russia will be forced to devalue the ruble due to the economic crisis, capital flight and a fall in world oil prices, which have declined from their peak of $147 per barrel in July to just under $40 per barrel.

Russia's monetary authorities have said on numerous occasions that they planned to pursue a policy of the ruble's gradual depreciation. Following these statements, the Bank of Russia has allowed the ruble to weaken against the dollar/euro basket of currencies by about 1% a week.

Central Bank First Deputy Chairman Alexei Ulyukayev said the country's top bank was deliberately pursuing this policy in the interests of citizens and business giving them time to choose the foreign exchange strategy and preventing panic.

"As for the ruble exchange rate, it must be effective and correspond to the real state of our economy. This means that we must support it within certain boundaries but at the same time this rate must be perhaps more flexible than it has been lately so as not to create problems in the economy," Medvedev said.

The ruble currently trades at 33.86 rubles to the bi-currency basket, which is used by the Central Bank as a benchmark guideline for its foreign exchange operations. The ruble closed at 28.69 to the dollar and at 40.18 to the euro on the MICEX trading on Wednesday.

The ruble's sharp devaluation in August 1998 led to the depreciation of Russian households' ruble-denominated savings and the collapse of the banking system.

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