UPDATE 2-Russian officials play down concern over weakening rouble

Thu Aug 22, 2013 9:31am EDT

* Russia's central bank says rouble fluctuating, not weakening

* Central bank says rouble moves towards a free float

* Finmin relaxed on rouble's weakening, will buy forex

* Russia will place $7 bln Eurobonds in 2013 if markets allow

By Oksana Kobzeva and Darya Korsunskaya

MOSCOW, Aug 22 (Reuters) - Russia's central bank and finance ministry on Thursday played down the rouble's recent declines amid a broader emerging markets sell-off, saying the fluctuations were a normal part of shifting to a free float.

The shift out of emerging markets gathered pace this week, sparked by the expected tailing off of U.S. money printing, with the rouble nearing four-year lows against a basket of dollars and euros tracked by the central bank.

"This situation concerns primarily India. The rouble is relatively stable. I do not consider this to be a serious fall," Finance Minister Anton Siluanov told reporters on Thursday.

Russian assets have not been as hard hit as those in other emerging markets because high prices for oil, Russia's main export, sustain a structural current account surplus and help to keep the public finances in balance.

Although the central bank has been conducting low-key interventions to smoothe the pace of the rouble's decline, it still has plenty of firepower, with foreign reserves steady over the past week at $508 billion.

The rouble was down 0.1 percent against the dollar at 33.16, a six-week low, while the Indian rupee and Turkish lira skidded to new record lows against the dollar. The rouble trimmed some losses after earlier comments by the central bank intended to calm market nerves.

"It is not weakening, these are fluctuations because we are moving towards a freely-floating exchange rate," Sergei Shvetsov, the central bank official in charge of reserves management and market operations, told reporters earlier.

Responding to a reporter's question, Shvetsov also said that rumours that the rouble was being deliberately allowed to weaken were "exaggerated to a significant extent".

The central bank blew $200 billion of its reserves in 2008-09 before abandoning an attempt to shore up the rouble and allowing it to depreciate by more than a third. The authorities have since adopted a more flexible exchange rate policy.

ON SCRIPT

The phrasing used by Shvetsov, just promoted to take charge of overseeing Russia's financial markets next month, was echoed by Siluanov.

Russian policy makers, seeking ways to revive flagging growth, backed a weaker rouble in June, when Siluanov also spelled out a change in the way he plans to channel windfall oil revenues into a rainy-day fund.

Despite the rouble's subsequent decline, Siluanov said the Finance Ministry still plans to buy foreign exchange worth 30-50 billion roubles ($900 million to $1.5 billion) on the market by the end of this year to top up the Reserve Fund.

"Our actions will be coordinated with the central bank, taking into account exchange rate policy. We of course won't act in a way that weakens the rouble," Siluanov said.

The Finance Ministry also stands ready to spring a trap on speculators who might bet aggressively against the rouble, saying it could yet go ahead with a planned $7 billion in Eurobonds this year should market conditions allow.

FOUR-YEAR LOW

The rouble's exchange rate fell to 38.10 against the currency basket - comprising 55 U.S. cents and 45 euro cents - its lowest in nearly four years.

The central bank still runs a managed float in which it seeks to contain rouble moves within a moveable exchange-rate corridor that it has gradually broadened as part of a planned transition to an unfettered free float.

It shifted the trading corridor for the rouble against the basket by 5 kopecks on Wednesday, to 32.05-39.05 roubles.

Wednesday's minutes from the Federal Reserve's latest policy meeting did little to change the view that the U.S. central bank will next month start scaling back the bond purchases that had helped to generate emerging market gains.

That fuelled a fresh spike in U.S. 10-year yields, the risk-free rate against which emerging markets are benchmarked. The yield on Russia's Eurobond maturing in 2030 rose to 5.3 percent, its highest since June.