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UPDATE 2-Russia eyes new measures to cap rouble rally

Published 11/18/2009, 10:28 AM

* Rouble hits highest since Jan vs currency basket

* Russia may consider soft measures to stem inflows

* C.bank chief reiterates he is against capital controls

(Recasts with Ignatyev comments)

By Yelena Fabrichnaya and Andrei Ostroukh

MOSCOW, Nov 18 (Reuters) - Russia allowed the rouble to scale fresh, oil-fuelled highs versus a euro-dollar basket on Wednesday, but the central bank said it would consider "soft" measures to limit future speculative inflows into the country.

The rouble has firmed 9 percent versus the basket since September to 35.03, its strongest since January as investors regain confidence in emerging markets, the domestic economy starts to recover from recession and oil prices hold near one-year highs .

The central bank has so far intervened only to slow down the appreciation rather than stop it, but there are some signs officials are getting concerned about the inflow of hot money.

"I am against resuming capital control measures. At the same time, there are other measures, softer ones, which could slow down the inflow of speculative capital...It is being discussed," central bank chairman Sergei Ignatyev told reporters.

Such measures could include monitoring external borrowing of state-controlled companies, as well as re-introducing differentiated minimum reserve requirements for banks' liabilities in foreign currency versus those in the rouble, he added.

Currently the central bank allows the rouble's floating corridor to shift by 5 kopecks for each $700 million of interventions at either of the band's boundaries. Dealers say the latest intervention level is at 35.00 against the basket.

Ignatyev said earlier on Wednesday the central bank had bought $6 billion in currency market interventions between Nov. 1 and Nov. 17, after purchases of over $15 billion last month.

"The order of interventions may change ... It is possible that the floating (rouble) corridor could be altered not just automatically," Ignatyev told reporters later.

However he reiterated Russia's long-term goal remains to move to a floating exchange rate and inflation targeting.

"By my estimates it will take 1-1/2 years, possibly 2. And possibly it will not be an absolutely clean float," he said.

Officials have previously said Russia intends to reserve the right to intervene in the currency market if it deems necessary even after the free float.

Another factor that could discourage capital inflows and cap the rouble's rally would be further interest rate cuts.

Ignatyev reiterated the likelihood of more monetary easing to come, saying the benchmark refinancing rate could be cut to under annualised 9.00 percent next year from 9.50 percent currently.

The minimum one-day repo rate, now at 6.75 percent, will be reduced more slowly than the refi, he added. The daily repo auctions have been the central bank's chief tool for providing short-term liquidity to the banking sector.

Russia saw a net capital outflow of $53 billion in the first 10 months of 2009, Ignatyev told parliament earlier. Based on previously reported data, that implies capital inflows of over $9 billion in October, in line with previous estimates. (Writing by Toni Vorobyova; Editing by Victoria Main)

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