June 15, 2011 / 4:44 PM / in 6 years

UPDATE 2-Russia c.bank signals pause in hikes; plans to buy AUD

* Says interest-rate corridor satisfying

* Signals pause in rate hike in coming months

* Says will add Australian dollar to reserves in autumn

* Says increasing gold in reserves “important element”

(Adds comments on Australian dollar, gold)

By Elena Fabrichnaya

MOSCOW, June 15 (Reuters) - Russia central bank is satisfied with its interest rate corridor, a senior official said on Wednesday, indicating that it may disregard recent IMF advice and put interest rate hikes on pause.

“We have made significant progress in this (narrowing the interest rate corridor) and for now we are satisfied with its width, as well as with the level of interest rates,” Central Bank First Deputy Chairman Alexei Ulyukayev told journalists.

The central bank raised its overnight deposit rate last month by a quarter-point to 3.50 percent, narrowing the interest rate corridor whose upper boundary is formed by the refinancing rate at 8.25 percent.

On Tuesday, the International Monetary Fund urged Russia to further tighten monetary policy by withdrawing liquidity and raising rates to ensure sustainable economic growth [ID:nLDE75D13F].

The central bank, whose policy decisions this year have had to juggle efforts to combat inflation, tame the rouble’s firming and spur economic growth, is to hold another rate meeting at the end of June.

Asked about the likelihood of leaving rates unchanged until the end of 2011, Ulyukayev said that this is not decided yet.

“We were talking about the coming months, maybe two, maybe five, I cannot say right now -- all depends on the (economic) situation,” he said.

DIVERSIFYING RESERVES

Ulyukayev also said that the central bank will pursue diversification of its gold and foreign exchange reserves by adding the Australian dollar AUD=, but any moves are unlikely before autumn.

He said that at the last meeting the bank’s monetary policy committee approved a list of banks that will conduct its operations with the Australian dollar.

“They will place funds on deposit and buy securities (denominated in that currency),” Ulyukayev said without naming the banks.

“I expect (start of operations) in autumn,” Ulyukayev said. “I cannot say more exactly when -- maybe in September, maybe in October.”

He said the main goal behind the diversification of reserve assets is to decrease risks, especially given the increasing uncertainty over the U.S. debt ceiling.[ID:nN15289440]

Late last year, the central bank added the Canadian dollar CAD= to the foreign currency portion of its reserves. The vast majority of the reserves, however, are still kept in the U.S. dollar and the euro, with 45.2 percent and 43.1 percent respectively. [ID:nLDE74F1AX]

The Canadian dollar’s share as of Jan. 1 stood at 0.8 percent, while the rest is kept in the British pound GBP=, with 9.3 percent, and the Japanese yen JPY=, with 1.6 percent.

He said, however, that the market capacity of the newly added currencies is small.

“There is one large market -- the dollar market, and one almost large -- the euro, but all the others are declining,” he added.

“Therefore, each following currency that we include has a nominal use -- in terms of turnover, its share of reserves.”

The reserves, the world’s third largest, stood at $522.8 billion as of June 3.

STOCKPILING GOLD

When it comes to hedging against risks, however, gold is one of the safest bets, Ulukayev said, reflecting a view increasingly shared by other central banks seeking an alternative to currencies and protection from the debt crisis in Europe. “Increasing monetary gold in our reserves is an important element,” Ulyukayev said.

“We continue doing that and we are the leaders among central banks when it comes to (gold) growth indicators,” he said.

According to the IMF data, Russia is the world’s eight largest holder of gold, with some 811 tonnes, up from 788.78 tonnes in January. In April, the gold reserves were worth nearly $41 billion, the IMF data showed. Last year alone, the gold portion of the country’s gold and foreign exchange reserves increased by 23.9 percent.

Reporting by Elena Fabrichnaya; Writing by Lidia Kelly; Editing by Andrey Ostroukh/Ruth Pitchford

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