Dec. 11 (Bloomberg) -- Russia devalued the ruble for the fifth time in a month, widening its trading band against the dollar and euro after reserves fell $161 billion defending the exchange rate.
Bank Rossii extended the amount the ruble can decline against a target exchange rate to 7.7 percent, from 6.7 percent yesterday and 3.7 percent a month ago. The band was widened by 30 kopeks today, said a spokesman who declined to be identified on bank policy. The currency weakened 0.7 percent against the basket.
“They don’t have a choice but to let it weaken and the faster they do it the better,” said Beat Siegenthaler, head of emerging markets strategy in London at TD Securities Ltd. “Regular weekly steps are now the most likely scenario.”
Russia has drained 27 percent of its reserves since the start of August to stymie a 16 percent decline in the ruble versus the dollar as tumbling oil prices, the war in Georgia and the worst global financial crisis since the Great Depression caused investors to remove almost $200 billion from the country, BNP Paribas SA data shows.
The ruble fell 4.8 percent against the central bank’s basket in the past month. Goldman Sachs Group Inc. predicts the sliding price of oil will force a ruble drop of as much as 25 percent over the next 12 months. Troika Dialog, Russia’s oldest investment bank, is calling for a one-time, 20 percent devaluation in late January, when there is less risk of bank runs during the New Year’s holidays. UniCredit SpA forecasts a 15 percent decline by end-2009.
The world’s biggest energy producer is suffering as the price of Urals crude, its main export blend, has dropped 71 percent from a July record to $40.74 a barrel, below the $70 average required to balance the nation’s 2009 budget.
Bank Withdrawals
Russians withdrew 6 percent of their savings accounts in October, the most since Bank Rossii started collating the data two years ago. Deposits in foreign currency, meanwhile, rose 11 percent.
Foreign-exchange reserves decreased by $17.9 billion to $437 billion in the week to Dec. 5, more than the $11.25 billion decline that was the median estimate of five economists surveyed by Bloomberg this week. Prime Minister Vladimir Putin pledged last week to use the nation’s reserves stockpile, the world’s third largest, to prevent “sharp” movements in the currency.
The ruble dropped as much as 1.3 percent to 36.7136 per euro, the weakest since Sept. 25. It was at 36.6575 per euro by 11:38 a.m. in Moscow, from 36.6603 yesterday. Against the dollar, the currency fell 0.4 percent to 27.9443.
Those movements left the ruble at 31.8627 versus the basket, which is made up of about 55 percent dollars and the rest euros.
More Devaluations
The weakest end of the trading band is now about 31.90, from the previous 31.60, said Siegenthaler, who predicts a further 20 percent drop versus the basket should oil prices stay at current levels.
“It seems that they will continue at this pace of small devaluations,” said Elisabeth Andreew, chief currency strategist at Nordea AB in Copenhagen, Scandinavia’s biggest bank. “But we can’t rule out a bigger devaluation.”
To contact the reporter on this story: Emma O’Brien in Moscow at [email protected]
Last Updated: December 11, 2008 05:42 EST
Bank Rossii extended the amount the ruble can decline against a target exchange rate to 7.7 percent, from 6.7 percent yesterday and 3.7 percent a month ago. The band was widened by 30 kopeks today, said a spokesman who declined to be identified on bank policy. The currency weakened 0.7 percent against the basket.
“They don’t have a choice but to let it weaken and the faster they do it the better,” said Beat Siegenthaler, head of emerging markets strategy in London at TD Securities Ltd. “Regular weekly steps are now the most likely scenario.”
Russia has drained 27 percent of its reserves since the start of August to stymie a 16 percent decline in the ruble versus the dollar as tumbling oil prices, the war in Georgia and the worst global financial crisis since the Great Depression caused investors to remove almost $200 billion from the country, BNP Paribas SA data shows.
The ruble fell 4.8 percent against the central bank’s basket in the past month. Goldman Sachs Group Inc. predicts the sliding price of oil will force a ruble drop of as much as 25 percent over the next 12 months. Troika Dialog, Russia’s oldest investment bank, is calling for a one-time, 20 percent devaluation in late January, when there is less risk of bank runs during the New Year’s holidays. UniCredit SpA forecasts a 15 percent decline by end-2009.
The world’s biggest energy producer is suffering as the price of Urals crude, its main export blend, has dropped 71 percent from a July record to $40.74 a barrel, below the $70 average required to balance the nation’s 2009 budget.
Bank Withdrawals
Russians withdrew 6 percent of their savings accounts in October, the most since Bank Rossii started collating the data two years ago. Deposits in foreign currency, meanwhile, rose 11 percent.
Foreign-exchange reserves decreased by $17.9 billion to $437 billion in the week to Dec. 5, more than the $11.25 billion decline that was the median estimate of five economists surveyed by Bloomberg this week. Prime Minister Vladimir Putin pledged last week to use the nation’s reserves stockpile, the world’s third largest, to prevent “sharp” movements in the currency.
The ruble dropped as much as 1.3 percent to 36.7136 per euro, the weakest since Sept. 25. It was at 36.6575 per euro by 11:38 a.m. in Moscow, from 36.6603 yesterday. Against the dollar, the currency fell 0.4 percent to 27.9443.
Those movements left the ruble at 31.8627 versus the basket, which is made up of about 55 percent dollars and the rest euros.
More Devaluations
The weakest end of the trading band is now about 31.90, from the previous 31.60, said Siegenthaler, who predicts a further 20 percent drop versus the basket should oil prices stay at current levels.
“It seems that they will continue at this pace of small devaluations,” said Elisabeth Andreew, chief currency strategist at Nordea AB in Copenhagen, Scandinavia’s biggest bank. “But we can’t rule out a bigger devaluation.”
To contact the reporter on this story: Emma O’Brien in Moscow at [email protected]
Last Updated: December 11, 2008 05:42 EST
