# Russia shifts focus from dollar to euro

Central bank deputy chairman Konstantin Korishchenko said that from May, the bank would start managing the rouble’s level against the euro, as well as the US dollar. Initially the euro will comprise about 10--20% of activity, but this will increase to an equal weighting over a short period of time.

Alexei Mossieev, economic analyst at investment bank Renaissance Capital in Moscow, said that as the bank splits its intervention between the two units, there would be an immediate increase in volatility. "Though the central bank wishes to reduce fluctuation, the policy of reducing volatility against the euro will lead to an increase in that against the dollar," he said. This can be viewed as a step towards a free-floating exchange rate he added. Paul Timmons, economist at Russian-owned Moscow Narodny Bank in London, said Russian President Vladimir Putin has targeted a free-float by 2007, and agreed this latest move is a step towards that, although it is limited by the current lack of clarity. "The bank is trying to manage a smooth transition [to a free float], but it is not possible to engineer this," he said. "Either you are present or you are not."