Russia to oust US dollar from nation's financial policy

The majority of Russian people were saving their money in dollars during post-perestroika years

The Central Bank of Russia has recently announced that the official ruble rate will be calculated on the base of the dollar and euro cost. A spokesman for the Central Bank said that the dollar-oriented approach to the Russian currency policy is outdated. “Guaranteeing stability to the dollar rate against the ruble was leading to considerable fluctuation of the ruble and other foreign currencies, including the euro,” a statement from the bank ran. It is noteworthy that the European currency has obtained stable positions both in the Russian and in the world economy.

The Central Bank introduced the bi-currency approach to the financial policy: from now on it will be oriented on the cost of the standard value equal to $0.9 + €0.1. The ruble rate will stabilize against the euro a little, whereas it will still fluctuate against the dollar. When market members become accustomed to the novelty, the euro share will be growing according to objects and needs of the state.

The majority of Russian people were saving their money in dollars during post-perestroika years. Needless to say that the dollar has not been doing at its best lately. Slowly but surely, the US currency has been losing value after the crisis of 1998 – presumably because of high oil prices. According to experts' estimates, the trend will be preserved in 2005, if the USA does not take measures to cut budget deficit. The euro, however, continues breaking all records, although analysts did not lay much hopes on the European currency before.

It is not ruled out that the reform will exert a positive influence on the Russian economy. The bi-currency approach will be capable of regulating the financial market with the help of interest rates (as it is practiced in all civilized countries) and use currency interventions at a lower capacity. Common Russian citizens are not likely to enjoy considerable changes for the better, though. If the Central Bank of Russia continues backing the weak dollar, everything will be left as it is.

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Author`s name Olga Savka