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UPDATE 1-Rouble at fresh peak as Russia focuses on inflation

Published 04/26/2011, 09:47 AM
Updated 04/26/2011, 09:52 AM

* Set new 2-1/2 year peak of 27.77 vs battered dollar

* Backed by policymakers' focus on controlling inflation

* EconMin forecasts more appreciation

(Adds new peak, Klepach, analyst comments, closing prices)

MOSCOW, April 26 (Reuters) - The rouble hit 2-1/2 year highs to the dollar on Tuesday after Russian policymakers said controlling inflation was a top priority, pointing to the prospect of higher domestic interest rates as the U.S. currency came under broad pressure.

The Economy Ministry forecast up to 16 percent in further rouble gains this year if oil prices stay around current high levels, giving the market a further boost. [ID:nLDE73P0VE]

The rouble firmed as far as 27.77 per dollar, its strongest since December 2008, before trimming the day's gains to 6 kopecks to close at 27.79

Against the single currency, the rouble was broadly steady at 40.65

A round of comments on inflation late on Monday suggested Russian officials are shrugging off oligarchs' complaints about the strength of the rouble, and are more focused on fighting inflation -- cited by voters as a key concern ahead of elections in late 2011-early 2012.

"It is becoming clear that not only is inflation the greater priority but that a stronger rouble is one of the mechanisms that will be used to try and contain inflation," Chris Weafer, strategist at Uralsib, said in a research note.

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Prime Minister Vladimir Putin said the exchange rate should be predictable and well-founded, but agreed with Finance Minister Alexei Kudrin that fighting inflation was a priority.

"What comes first, what comes second: what is the horse and what is the cart? The horse -- the thing that will get us out -- is of course fighting inflation. And then comes everything else," Putin said.

The central bank said it would consider raising interest rates at Friday's meeting and first deputy chairman Alexei Ulyukayev also said that further increases in reserve requirements were on the cards. [ID:nLDE73O0H4]

Although oligarchs' complaints about the strength of the rouble -- which is up around 9 percent versus the dollar since the strat of 2011 -- may prompt the central bank to delay any further steps towards greater currency flexibility, analysts do not expect it to reverse the steps already taken.

Oil prices -- a key source of revenues for world's top producer and thus a major driver of Russian markets -- recovered from earlier losses, giving further support to the rouble. [O/R]

Deputy Economy Minister Andrei Klepach on Tuesday forecast that the rouble could firm as far as 24 per dollar by the end of the year if oil prices hold at highs of $115-120 a barrel.

However, he cautioned that this could erase Russia's current account surplus and weigh on its manufacturers. (Reporting by Toni Vorobyova and Yelena Fabrichnaya; Editing by Patrick Graham)

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