What is the currency corridor
What is the currency corridor
The currency corridor is the one established by the centralthe country's bank is the limit of fluctuation of the national currency rate. It helps establish a predictable national currency rate in the country and prevent the influence of external destabilizing factors, the emergence of crisis phenomena.
Currency corridor in Russia
It is common knowledge that the introduction of a currency corridor is usually made in the absence of available funds in the financial market, in the conditions of a budget deficit and the presence of a large external debt.
The currency corridor was introduced in Russia in 1995,True, it existed in its original form for only two months. Then, the currency corridor was set in the range from minus 5.7% to plus 7.5% of the level of the dollar.
In 1996, a new currencycorridor, but in June of the same year, Russia introduced a policy of sliding the ruble against the US currency. It was a kind of oblique ruble exchange rate against the dollar. Changes in the exchange rate of the national currency began to be tied to inflation forecasts, but with a slight lag.
In 2008, the global financial crisis broke out,during which a shortage of liquidity began to be acutely felt in Russia. It was at that time that the Central Bank of Russia introduced a bi-currency corridor, which consisted of a ratio of 0.45 for the euro and 0.55 for the US dollar. Since that time, the ruble exchange rate in the bi-currency corridor was supported by interventions from the Central Bank's foreign exchange reserves.
Floating ruble rate
In the second half of 2014, world prices foroil began to fall precipitously and market speculators began to exert great pressure on the Russian currency. In connection with the massive buying of the American currency, in the first days of November, the market began a strong fall in the ruble against the US dollar. However, Russian banks now do not have an urgent need to buy dollars. This is due to the introduction of the CBR of Russia's currency repo for a period of 28 days.
On November 11, 2014, the Central Bank of Russia made a trulyhistorical step: actually canceled the currency corridor, by which the value of the bi-currency basket was kept at the level of 0.55 and 0.45 per dollar and euro, respectively.
The ruble corridor, in fact, does not disappear at all, it is just now that the Central Bank of Russia will conduct currency interventions when it deems it necessary.
