The dual-currency basket is a financial element of the monetary policy of Russia, the main task of which is to stabilize the national currency. With its help, the value of the ruble is set in relation to the dollar and the euro. And the value of the dual-currency basket is influenced by quotations of the euro, the dollar relative to the Russian ruble.
Dual currency basket definition
What is a dual-currency basket in simple words? Today, a financial storm is having a negative impact on the state economy, which significantly affects the country's population. Global problems of the economic sphere are a topic for endless discussion, but everyone has to suffer from the fall in the value of the state currency.
Therefore, a dual-currency basket is a concept that is relevant for everyone. But it is not so simple for an ordinary person to understand complex economic theories. And the difficulty lies only in understanding the essence of the concept of “basket” as a regulatory mechanism. In general, this is explained quite simply. The bi-currency basket of the Russian Federation shows a landmark for determining the ruble exchange rate using two additional currencies.
The item was introduced in 2005. The initial cost of the basket was 0.1 euros and 0.9 dollars per ruble. This means that the formation of the ruble depended more on the dollar than on the euro.
The intense dynamics of the dual-currency basket is obvious. At that time, the Central Bank of Russia was buying up US currency in a huge amount. If we compare the indicators of February 2007 and 2005, we can conclude that the euro is almost equal to the dollar, although the latter still occupied a priority position. For one ruble, 0.45 euros and 0.55 dollars were offered. The same ratio has been preserved to this day.
The situation arose due to the appreciation of the euro and the fall of the dollar. The central bank resorted to artificial regulation of the exchange rate, the purpose of which was to slow down the fall of the dollar and the growth of the euro. Otherwise, the Russian ruble would become prohibitively expensive for the national economy.
Reasons for the formation of a dual-currency basket
Until 2005, the ruble depended only on the dollar. Over time, the European Union began to have a significant impact on the global economy. The European currency has firmly taken its position in the financial market, which, in turn, has led to a fall in the dollar. The influence of the fluctuation of the American currency on the ruble became tangible, and the state decided to create a dual-currency basket, adding more euros to the dollar.
Dual currency corridor boundaries: calculation
The ratio of the ruble to other more stable currencies is displayed in a dual-currency basket. Its value is calculated according to the following formula: 0.45 is multiplied by the current euro exchange rate and is added to 0.55 times the dollar exchange rate. The result is the equivalent in Russian rubles.
Due to the average ruble exchange rate, a corridor is being established, the borders of which today range from 36–38 rubles. Its range is subject to change depending on the economic stability of the state. If the value of the described operational benchmark does not fit into the framework, the Central Bank artificially aligns the national currency, which consists in buying or selling it and issuing.
Dual currency basket functioning
The majority of the population does not understand the mechanism of the dual-currency basket. The Central Bank of Russia cannot clearly explain the principle of its work.Today, the Russian economy can hardly be called promising or even stable. The dual-currency basket exchange rate does not fit into the established framework of the monetary corridor, the average value of which is 30 rubles.
The Central Bank says that it is not going to cancel the described principle, on the contrary, it intends to expand the boundaries of the mentioned corridor. It follows that the dual-currency basket can only be a guide. The basis for establishing the real exchange rate of the national currency is the results of trading on the Moscow Interbank Currency Exchange. Moreover, the results of today's trading set the course for tomorrow, because, according to the Central Bank, it is not so prone to fluctuations in the market, such as unstable banking liquidity.
Background for creating a dual-currency basket
Currency market Over the entire period of its existence, Russia was constantly subjected to artificial smoothing of the national currency to ensure the stability of the ruble. In the conditions of an unstable economic situation, the dynamics of the ruble against the dollar changed dramatically.
The Central Bank was forced to stabilize the nominal exchange rate, which negatively affected the position of the Russian ruble relative to other, no less significant world currencies, including the European one.
Today, the EU has a huge impact on the Russian economy, so the position of the euro as a second currency along with the dollar is becoming stronger. In other words, the stability of the ruble in the current conditions cannot depend solely on the dollar, as it was before. As a result of the creation of the dual-currency basket, financial policy has become more susceptible to changes in the euro / dollar rates in the Forex market.
Dual currency basket gives a more objective understanding of what is being done in the foreign exchange market. Today, Russian investors have the opportunity to convert their dollar savings into euro or ruble.
The stability of the latter relative to the dollar is increasing. However, all this leads to the emergence of currency risks, since under such circumstances the state of the ruble is affected not only by the Russian economy, but also by the economic situation of other countries.
Dual-currency basket: quotes
Any currency has its own quotes. Dual currency basket is no exception. A quote is a certain unit that shows the value of the currency at the time the market closes. Quotes are used after bidding. This value is considered absolute.
There are also relative quotes. This is the percentage change over a certain period of time. Within 52 weeks, the dynamics of oscillations are studied and peaks and falls are established. The BVK indicator displays its quotes. Most tables provide data for up to three years. You can study stock trading online and, based on their results, also determine quotes.
Dual currency deposit concept
A bi-currency deposit is a deposit amount, the return of which depends on its exchange rate and alternative currency as of the date agreed upon when drawing up the contract. The investor guarantees increased interest. All deposit accruals are paid in the investment currency.
Benefits and risks of a dual currency deposit
The obvious advantages of the contribution include the following points:
- Placement rates far exceed classic deposit rates.
- The deposit can be opened in any currency.
- The client can independently manage the parameters of the dual-currency deposit, based on his personal needs and on the situation in the financial market.
- Interest is paid regardless of the conversion of the deposit body.
- When converting the deposit body to an alternative currency, the exchange rate is much more profitable than the hedging rate that was fixed at the time of the transaction.
Despite all the positive aspects, the risks of such a deposit are also assumed.
- If the market rate for some reason changes dramatically, then the client may lose a significant part of the money during the conversion.
- This type of deposit does not provide for early withdrawal.
The dual-currency basket affects the country's economy not only during its stability. In fact, it artificially restrains the manipulation of the ruble. This, in turn, inhibits the growth of its value and regulates inflation. The growth of the national currency leads to higher prices for exported goods, which is the reason for the fall in exports. There is also the possibility of a decrease in the state budget.
Today, forecasts indicate that the euro share in the dual-currency basket may eventually exceed the dollar.
