The dual-currency basket in simple words is The rate of the dual-currency basket

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

People who are far from the economy, financial relations and the banking sector do not even know that since February 1, 2005, the Central Bank of Russia has been using the value of the dual-currency basket to regulate the ruble exchange rate. Why use this method, why it is good and what are its negative sides, we will analyze in this article.

Calculation formula

The dual-currency basket in simple words is the exchange rate of the ruble against the US dollar and the euro. The dollar is given more preference, and in the BC its share is 55%, and the euro, respectively, 45%. That is, in order to calculate the value of the dual-currency basket, you must use the following formula:

0.55current US dollar rate according to CBR + 0.45current euro rate according to CBR.

This formula calculates the exchange rate starting from 2007.

In other words, the bi-currency basket is a way to find out the demand for the Russian ruble in relation to a certain proportion of the dollar and the euro.

Biocurrency basket corridor

There is such a thing as a floating bi-currency corridor. The Central Bank sets the limitsboundary values for the course, in which it can fluctuate in the direction of decrease or increase. When values go beyond the limits of the dual-currency basket, the Central Bank regulates measures to stabilize the exchange rate. This practice helps to keep the value of the Russian ruble at the required level to support exporters to foreign countries.

It can be said that the dual-currency basket in simple words is a way of stabilizing the Russian ruble, which is used by the Central Bank. This method determines the real exchange rate of the ruble against the two most common currencies, which makes it possible to understand the value of the domestic currency on the international market.

History of Appearance

The idea of introducing an effective exchange rate of the Russian ruble arose back in 2003. The nominal exchange rate had to be adjusted according to inflation indicators, both domestic and foreign, and also compared with the shares of various foreign currencies that are involved in the trade operations of the Russian Federation.

In the beginning, the Central Bank focused only on US dollars in its policy, but over time, this approach lost its relevance and it became necessary to compare the ruble with another stable currency - the euro. This happened against the backdrop of a weakening dollar and the strengthening of the positions of the European common currency in international settlements.

Due to the fact that mainly US dollars and euros were used in trade, the calculation of this indicator was reduced to comparing the ruble preciselywith these two currencies.

Get away from dependence on the dollar

The Central Bank wanted to reduce the influence of the US dollar on the ruble exchange rate, so that it would be less dependent on fluctuations in this foreign currency. For this purpose, a dual-currency basket was created, which became the benchmark for the monetary policy of the Central Bank of the Russian Federation.

When the bi-currency basket first appeared, 90% was given to dollars, and 10% to euros. And gradually the share of influence on the exchange rate of the dollar decreased, while that of the euro increased, and by February 8, 2007, it stopped at the amount that is valid today.

Wanted to increase volatility

The increase in the share of the euro in the calculation of the dual-currency basket was carried out in order to reduce the volatility of the ruble exchange rate, that is, to make the Russian currency easily convertible. A dual-currency basket in simple terms is the so-called benchmark by which the Central Bank builds its foreign exchange policy.

In fact, two dual-currency baskets are calculated. The first is the one mentioned above, the calculation of which is to find out the value of the ruble in relation to the US dollar and the euro. The second bi-currency basket of the Russian Federation is used to calculate the real exchange rate of the ruble based on the exchange rates of those countries with which Russia has any trade relations.

The increase in the share of the euro did not reduce volatility

Time shows that the decline in the share of the dollar in favor of the European currency helped reduce volatility in the short term. Against the background of the fact that the Central Bank is tryingby all means to fill the reserves as much as possible, in June 2015 the Russian ruble was recognized as the most volatile currency.

You need to understand that the more the Central Bank buys foreign currency, the more it issues rubles to the market, which helps to increase supply while maintaining demand at the same level. They say that a revision of the policy of the Central Bank can force a sharp fall in the ruble, that is, a significant excess of the upper limit of the corridor of the dual-currency basket.

The Central Bank must constantly monitor changes in the value of the US and Eurozone currencies. Experts say that the share of influence of foreign currencies should be dynamic and change depending on changes in the volume of trade transactions that are carried out with these countries.

The cost of oil hit the ruble

The sharp decline in the cost of oil de alt a significant blow to the ruble against other currencies. But the policy of a flexible dual-currency corridor allows to resolve the situation without serious losses. This means that when necessary, the Central Bank of the Russian Federation simply lowers the lower threshold or increases the upper one. Such operations can be painlessly carried out by a large gold and foreign exchange reserve, which is used in the most critical moments.

The value of the dual-currency basket is nothing more than a simple benchmark. Real exchange rates are determined by trading on the Moscow Interbank Currency Exchange. The rate for today is determined by the results of trading yesterday. Compared to other biddersThe Central Bank is the undoubted leader, and currency fluctuations depend on its actions.

The trading exchange sets the rate

It would seem that the rate is set as a result of trading, that is, by market methods, but due to the large-scale amount of resources of such a participant as the Central Bank, he independently sets an acceptable rate for him. Due to the fact that the Russian Federation ranks third in terms of gold and foreign exchange reserves in the world, the Central Bank is able to protect the ruble from almost any speculation.

This situation, when the exchange rate of the dual-currency basket decreases, is not an absolutely negative factor. Any economist understands that the more expensive the ruble becomes, the more expensive Russian goods will be abroad, and as a result, sellers will face more and more competition. Therefore, sometimes it is beneficial to slightly weaken the currency in order to more successfully sell goods abroad.

And, it would seem, for the population the opposite is true: it is more profitable when the ruble is strong, that is, purchasing power increases, but in any case, if the industry loses its markets abroad, this will lead to a reduction in production, jobs, rising unemployment and other unpleasant consequences. And this is an undesirable result of the policy of the Central Bank, so the government will always avoid such consequences.

At the same time, the state will always try to find a compromise between exporters and ordinary people who want to buy something abroad. And in this Central Banka dual-currency basket will always help, with the help of which you can always see the real price of the national currency.