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VTB apprehensive that central bank move would fuel speculation.

Global Banking News-August 21, 2014--VTB apprehensive that central bank move would fuel speculation

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Global Banking News - 21 August 2014

Russia-based VTB Bank is apprehensive that a move by the Russian central bank to amend the parameters of its currency intervention mechanism could lead to speculation.

The central bank is making the move in order to further enhance the rouble's flexibility. VTB said that the move would take the bank closer to a floating rate.

VTB Capital analysts, Vladimir Kolychev and Daria Isakova, said, 'The Central Bank of Russia seems keen to time this step during a low holiday season so as not to distort market trading, and the initial reaction is indeed rather muted. RUBBASK has been trading in an intervention-neutral zone for more than 3 months (barring MoF purchases) and overall seems to have found a new equilibrium (which we believe is c.35-36) without CBR interventions. We believe the level (corridor)-based intervention mechanism by design welcomes unnecessary speculative activity and ultimately the CBR is likely to abandon it and switch to a dirty float regime with interventions triggered mainly by the volatility and financial stability considerations.'

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Publication:Global Banking News (GBN)
Date:Aug 21, 2014
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