A weaker dollar is a serious challenge to Russia's economy, despite official assurances that the 2006 inflation target will be achieved, a Reuters poll of 15 economists showed on Friday.
The dollar has hit a 7-year low against the rouble which traded at 26.28 to the dollar, having appreciated by 9.66 percent against the greenback so far this year.
Economists saw the rouble at a median of 26.30 to the dollar at the end of 2006 and at 26.00 at the end of the first quarter of 2007. "The dollar's fall led to the rouble's unexpected appreciation and confused the central bank's plans," said Alexei Vorobyov, analyst at Maxwell Capital. He said he had revised his forecast for the dollar rate down to 25.61 roubles at the end of the first quarter of 2007.
The dollar hit a 14-year low against sterling and a 20-month trough versus the euro on Friday after weak US data reinforced expectations that the Federal Reserve might cut interest rates next year.
"It is high time for the central bank to think about supporting the dollar in order to prevent the rouble's further appreciation," Vorobyov said. The central bank runs a managed float of the rouble using a dual currency basket made of 60 US and 40 euro cents and buys dollars, which commodity exporters bring into the country to pay salaries and taxes.
In 2006 the bank has also used the exchange rate as a tool to control consumer prices, which has allowed the rouble to appreciate by 4.3 percent against the basket. A stronger rouble makes imports cheaper but hurts domestic producers.
"For Russia's economy, the main risk of a weaker dollar hides in its threat to Russian exports, especially to those countries that are more or less linked to the US currency," said Yevgeny Nadorshin, analyst at Trust Bank.
"Imports from these countries may subsequently increase. We can expect increased pressure from Asia and, therefore, a worsening of Russia's position on the Asian markets," he added.
Economists saw Russia's gold and forex reserves, already the world's third largest after Japan and China, up at $290.0 billion at the year-end from $283.4 billion this week and at $315.8 billion at the end of the first quarter of 2007.
Analysts saw Russia's 2006 full-year inflation at a median of 9.0 percent, in line with the government's forecast, and below last month's forecast of 9.3 percent.
However, economists said that high rates of money supply growth in 2006, coupled with bulging year-end budget spending, could result in an inflation spike in the first quarter of 2007.
Economists saw January inflation at a median of 2.1 percent. In January 2005 consumer prices rose by 2.4 percent. "Most probably, the central bank will have to deal with the (inflation) problem in the first or second quarter of 2007," said HSBC analyst Alexander Morozov.