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08/17/1998 13:05:48 Analysts regard rouble move as devaluation

By Sebastian Alison MOSCOW, Aug 17 (Reuters) - The Russian government may not have declared an outright devaluation of the rouble but the new currency policy measures announced on Monday amount to one anyway, most analysts and dealers said. The measures, including a wider trading band for the rouble, are set to have political impact as well, amid reports the Kremlin wants to sack central bank Sergei Dubinin and that presidential economic aide Alexander Livshits tendered his resignation. The currency measures came after months of reassurances from the government and President Boris Yeltsin that they would stand by the rouble as a cornerstone of economic policy. "We can get into semantics but this is a devaluation anyway you slice it," said Richard Deitz, head of fixed income trading at investment house MFK Renaissance. "The currency has devalued de facto on the spot (market), the government has announced a widening of its trading bands and allowed it (the rouble) to float," he added. The government and central bank earlier announced a raft of new monetary policy measures in the wake of a fully-fledged crisis on the markets last week. The key points were allowing the rouble to float, a widening in the band in which the rouble will be allowed to fluctuate to 6.0/9.5 to the dollar through to the year end from 5.27/7.13 and a planned restructuring of debt to December 31, 1999. Prime Minister Sergei Kiriyenko earlier denied that the curerncy moves were a devaluation. "No, it is impossible to say (it is a devaluation)," he told a news conference. "It is a new approach to currency policy." Dealers said trade on the rouble/dollar market had totally dried up on the local market although the Russian curency was quoted at 7.100/7.1100 to the dollar. At currency exchanges, traders hiked rates to 7.50 or eight roubles to the dollar, with at least one quoting as low as 9.5 roubles, as people queued for dollars. Dealers said they expected the rouble to slide when trade recommenced as the after-effects of the measures took hold. "People are seeing this as a devaluation," said one foreign currency trader. "It's tantamount to devaluation," said Charles Blitzer, chief emerging markets economist at Donaldson, Lufkin & Jenrette in London. "We'll have to see whether the authorities can keep the devaluation controlled or not," he said. The currency turmoil seems likely to claim its share of political victims as radio Ekho-Moskvy reported that the Kremlin was seeking the resignation of central bank chief Sergei Dubinin and Interfax quoted long-time presidential adviser Alexander Livshits as saying that he was tendering his resignation. Will Draper, Russian equities analyst at HSBC in London, said the government had not announced a devaluation but that it was creating the facilities for a "gradual and controlled" fall. "It will become a devaluation when the rouble does move to 9.5 to the dollar, and it hasn't," he said. Kingsmill Bond, head of Russian research at Deutsche Morgan Grenfell, said the measures were effectively a devaluation. "At the end of the day it's all semantics, they've allowed the wall in the dam to break," he said. The measures included allowing the rouble freely to float with the central bank intervening to smooth any sharp fluctuations. The central bank plans to use flexible interest rate policies to control the rate. ((Moscow Newsroom, +7095 941-8520 moscow.newsroomreuters.com))

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