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UPDATE 1-Russia c.bank says no grounds for devaluation

Published 08/20/2009, 12:01 PM
Updated 08/20/2009, 12:03 PM
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* C.bank dispels devaluation rumours

* Says targets inflation, not exchange rate

* Says no plan to cut share of U.S. treasuries in reserves

(Adds Ulyukayev quotes, background, detals)

MOSCOW, Aug 20 (Reuters) - Russia's central bank sees no grounds for a rouble devaluation, though it does not rule out a weakening of the currency against the euro-dollar basket in the short term, a bank official was quoted as saying on Thursday.

The rouble, which lost one third of its value during a period of gradual devaluation that ended last January, has since been trading above the central bank's threshold of 41 roubles to the basket, made up of 0.55 dollars and 0.45 euros.

Rumours about a new devaluation, fuelled by increased volatility in the forex market and economic uncertainty, have been rife in recent weeks, with analysts saying a competitive devaluation would provide a much needed boost to industry.

"The reason for such rumours is probably a task for psychologists. Possibly the reason is a traditional summer news shortage, a search for a news peg, since there are no real reasons for devaluation," central bank first deputy chairman Alexei Ulyukayev told Prime Tass news agency.

Ulyukayev said by devaluation he meant a deliberate policy to weaken the currency or a market pressure resulting from weak economic fundamentals. "On both the first and second reason I give a negative answer," he said. He also said the central bank targeted inflation and not the exchange rate.

"The central bank does not pursue any goals linked to exchange rate formation."

Last year, the government and the central bank denied they had any plans to devalue the rouble before, spending about $200 billion or one third of gold and forex reserves to ensure a gradual slide of the currency.

"We have no intention to deliberately weaken the rouble just as we did not have an intention to deliberately strengthen it," Ulyukayev told Prime Tass. "To say that a 10 percent weakening will make the economy feel better is a groundless statement."

For a Reuters analysis on the outlook for the rouble, please click [ID:nLD685721]

Ulyukayev said that the share of U.S. treasuries in Russia's reserves remained stable at 30 percent and that there were no plans to cut this amount apart from an earlier stated intention to buy $10 billion worth of bonds issued by the IMF.

He said he expects zero inflation, or even negative inflation, in August and September on the way to a full-year 2009 inflation target of less than 11 percent. The Economy Ministry had earlier said August negative inflation was unlikely.

Russia's central bank is counting on lower inflation to enable it to keep cutting interest rates in a bid to help the economy out of its first recession in a decade.

Ulyukayev said he expects a spike in demand for bank sector liquidity in the range of "hundreds of billions of roubles" this autumn.

He also said net private capital outflow in the first seven months of 2009 was about $26 billion. (Writing by Gleb Bryanski, editing by Andy Bruce)

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