The bi-currency basket in simple words is ... The exchange rate of the bi-currency basket

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 used the value of the bi-currency basket to regulate the ruble exchange rate. Why use such a method, what it is good and what are its negative aspects, we will analyze in this article.

Calculation formula

The bi-currency basket in simple words is the ruble's exchange rate against the US dollar and euro. The dollar is given greater preference, and in 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:

0.55 * current US dollar exchange rate according to CB data + 0.45 * current euro exchange rate according to CB data.

According to this formula, the rate is calculated starting from 2007.

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

Corridor of the currency basket

There is such a thing as a floating bi-currency corridor. The central bank sets the admissible boundary values for the rate at which it can fluctuate towards a decrease or increase. When values exceed the marginal limits of the bi-currency basket, the Central Bank regulates measures to stabilize the exchange rate. This practice helps to keep the cost of the Russian ruble at the necessary level to support exporting producers to foreign countries.

We can say that the bi-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 to 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 for the Russian ruble arose in 2003. The nominal rate had to be adjusted according to the inflation indices, both internal and external, and also compared with the shares of various foreign currencies that are involved in the trade operations of the Russian Federation.

Initially, the Central Bank was guided only by US dollars in carrying out 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 background of the weakening of the dollar and the strengthening of the positions of the European common currency in the performance of international settlements.

Due to the fact that mainly US dollars and euro were used for trading, the calculation of this indicator was reduced to comparing the ruble with these two currencies.

Avoid dependence on the dollar

The Central Bank wanted to reduce the impact of the US dollar on the ruble, so that it depended less on the fluctuations of this foreign currency. To this end, the bi-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 only appeared, 90% was given to dollars, and 10% - to the euro. And gradually the share of influence on the rate of the dollar declined, and the euro increased and by February 8, 2007, stopped at a rate that is still valid today.

We wanted to increase volatility

The increase in the euro's share in the calculation of the bi-currency basket was implemented in order to reduce the volatility of the ruble exchange rate, that is, to make the Russian currency unit easily convertible. The bi-currency basket in simple words is the so-called reference point, according to which the Central Bank builds its currency policy.

In fact, two bi-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 on the basis of the exchange rates of those countries with which Russia has any trade relations.

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 to reduce volatility in the short term. Against the backdrop of the fact that the Central Bank is trying in every way to maximize the reserves, in June 2015 the Russian ruble was recognized as the most volatile currency.

It should be understood that the more the Central Bank buys foreign currency, the more it releases the ruble to the market, which contributes to an increase in supply, while demand remains at the same level. They say that to revise the policy of the Central Bank may cause a sharp fall in the ruble, that is, a significant excess of the upper limit of the bi-currency basket corridor.

The central bank should constantly monitor changes in the value of the currency of the US and the Eurozone. Experts say that the share of influence of foreign currencies should be dynamic and vary, depending on the changes in the volume of trade operations that are conducted with these countries.

The cost of oil hit the ruble

A sharp decline in the cost of oil caused a significant impact on the ruble against other currencies. But the policy of flexible bi-currency corridor allows to settle the situation without serious losses. This means that, when necessary, the Central Bank of the Russian Federation simply reduces the lower threshold or increases the upper threshold. Painlessly conduct such operations allows a large gold and currency reserve, which is used in the most critical moments.

The value of the bi-currency basket is not more than a simple benchmark. The real exchange rates are determined by trading on the Moscow Interbank Currency Exchange. The rate for today is determined by the results of yesterday's trading. Compared to other bidders, the Central Bank is an undoubted leader, and it is from its actions that currency fluctuations depend.

The exchange determines the exchange rate

It would seem that the rate is established as a result of trades, that is, by market methods, but because of the large amount of resources of such a participant as the Central Bank, he independently establishes an acceptable course for him. Due to the fact that the Russian Federation is the third largest gold and currency reserves in the world, the Central Bank is able to protect the ruble from virtually any speculation.

The situation is not absolutely negative when the exchange rate of the bi-currency basket is decreasing. Any economist understands that the more expensive a ruble becomes, the more expensive Russian goods will be abroad, and as a result, sellers will face increasing competition. Therefore, it is sometimes advantageous to weaken the currency a little, in order to sell goods abroad more successfully.

And it would seem that for the population everything is the opposite: it is more profitable when the ruble is strong, that is, the purchasing power increases, but in any case, if the industry loses its markets abroad, it will lead to a reduction in production, jobs, increased 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 Bank will always help bi-currency basket, with which you can always see the real price of the national currency.