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WRAPUP 2-Russia exits recession, rouble sets new highs

Published 10/20/2009, 09:47 AM
Updated 10/20/2009, 09:51 AM
DANSKE
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* Rouble hits highest since Dec against dollar

* GDP up in Q3, jobless rate at 10-mth low in Sept

* Finmin says can talk about exiting recession

(Updates with rouble close, c.banker, analyst quotes)

By Toni Vorobyova and Denis Pinchuk

MOSCOW/ST PETERSBURG, Oct 20 (Reuters) - Russia's economy put recession behind it with third quarter growth, data showed on Tuesday, giving investors a further reason to chase the rouble to its strongest since December against the dollar.

The rouble closed at 29.14 per dollar, 16 kopecks stronger on the day . Analysts said the central bank, by letting the rouble scale new highs, confirmed Russia is gradually moving towards a free-floating currency.

A recovery in oil and commodity prices, a revival in global debt markets and investors' renewed appetite for emerging markets put Russia's economy on the recovery path in the summer.

Third quarter gross domestic product (GDP) posted its first seasonally adjusted increase in over a year, up 0.6 percent compared to the preceding three months. [ID:nLK19842]

"We can talk about an exit from recession," Finance Minister Alexei Kudrin told reporters in St Petersburg. [ID:nLK281969]

The recovery thesis was further supported by the jobless rate falling to a 10-month low [ID:nMOS005570] in September and retail sales posting a fourth month of increases, although the pace of growth slowed [ID:nLJ731895].

One in 10 companies is hiring again, a poll by Superjob.ru showed, with some taking back employees they had made redundant.

The economy has also been given a boost by 300 basis points worth of interest rate cuts since April and officials' signals that more will come as long as inflation keeps easing.

Full year inflation will not exceed 10.3 percent, compared to the government forecast of 11-12 percent, the central bank's First Deputy Chairman Alexei Ulyukayev said. [ID:nLK396741]

ROUBLE EYES FREE FLOAT

Despite the rate cuts, Russia's refinancing rate at 10.00 percent offers attractive yields compared to rates of 1 percent or less in the rest of the G8.

Along with the brighter economic outlook and stronger oil prices this has been one of the factors supporting the rouble, which has notched up seven consecutive weeks of gains.

The central bank has allowed the currency to appreciate in what analysts say shows Russia is sticking by its aim to move to a free float over the next 3 years.

But it has been regularly intervening to keep the appreciation gradual by letting the rouble's floating corridor shift by 5 kopecks for each $700 million of interventions.

On Tuesday, dealers said the corridor shifted in two such steps to 35.70 and then 35.65 roubles against the euro-dollar basket . As such, they estimated the day's central bank interventions at $1.5 billion or more.

"Our participation is not meant to defend a particular level, but to smooth out volatility," Ulyukayev said, echoing previous comments from himself and other officials.

The rouble closed at 35.67 against the basket, having earlier hit its highest level since January at 35.64.

"The sentiment regarding the rouble is very strong at the moment, especially with oil prices around $80," said Lars Rasmussen, analyst at Danske Bank.

Russia's Urals oils blend rose to one-year highs of $77 a barrel . When it was last so strong, the rouble traded at 30.40 versus the basket -- some 15 percent stronger than now, potentially leaving scope for further appreciation.

"We are seeing is an almost complete move to a policy of inflation targeting," said Vladimir Tikhomirov, economist at Uralsib.

"The central bank now sees its aim as smoothing out (rouble) fluctuations, rather than fixing the rate at a particular level. The latest comments suggest that on the part of the government such policy has met with support." [ID:nLK333254] (Additional reporting by Yelena Fabrichnaya; editing by Stephen Nisbet)

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