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UPDATE 1-Russian rouble rally goes on; no extra c.bank moves

Published 03/11/2010, 06:00 AM
Updated 03/11/2010, 06:08 AM
EUR/RUB
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* Rouble firms vs dollar, euro

* Market "has become a one-way street" - analyst

* C.bank shifts boundary for 14th time since mid-Feb

MOSCOW, March 11 (Reuters) - The rouble extended its recent rally on Thursday and analysts forecast more of the same unless the central bank steps up interventions or administers sharp interest rate cuts.

It boosted gains to 5 percent in seven weeks, hitting fresh 14-months highs against a basket of currencies and fuelling concerns its swift rise could hurt Russia's nascent economic recovery, prompting speculation of more action from the authorities.

"The market seems to have become a one-way street with investors selling dollars heavily into the central bank and local rates plummeting," BNP Paribas said in a note.

Officials have not commented on the currency this month and the central bank has not stepped up its interventions, sticking by a policy of shifting the rouble's trading band in small increments with a view to slowing down excessive forex moves without stifling market trends altogether.

"The central bank has not changed the tactics of interventions -- buying $700 million before retreating by 5 kopecks," Uralsib analysts said in a note.

In the 14th such move since mid-February, it shifted the floating trading band to 34.30-37.30 roubles against the basket on Thursday from 34.35-37.35 , dealers said.

A trader at a major foreign bank in Moscow forecast that the rouble could strengthen to 34.20 against the basket in the near future.

The rally has been fanned by a surge in oil prices, attractive yield differentials and increasing investor appetite for emerging markets in the face of worries about the health of some developed European economies.

Month- and quarter-end domestic tax payments, starting next week, are expected to further boost the rouble.

As well as greater interventions, the central bank could step up the pace of interest rate cuts in a bid to slow down the rouble's rally by reducing its yield appeal. It is due to meet on rates sometime this month, but had not given a date.

Against the dollar, the rouble firmed to a 7 and 1/2-week high at 29.47 per dollar and hit 40.23 per euro, its strongest since December 2008 .

(Reporting by Andrey Ostroukh; Writing by Toni Vorobyova; editing by John Stonestreet)

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