The Moscow Times 13 Novembre 2008

The Central Bank spent an estimated $7 billion on Tuesday on establishing a new limit for the ruble after allowing it to weaken beyond a key level it had defended in recent months.

After breaking through its former 30.41 limit against a euro/dollar basket, the ruble weakened as far as 30.79, and analysts said the move underlined the strain intervention has put on national currency reserves.

Some analysts also highlighted the risk that ruble weakness could spread worry among ordinary Russians who remember the country's 1998 financial crisis.

The ruble closed at 30.70, and the Central Bank issued a statement saying it had widened the ruble's trading band by 30 kopeks in each direction "to increase the flexibility of the exchange rate." Previously, the band was seen around 29.25 to 30.41.

Dealers estimated that the Central Bank had sold $7 billion on Tuesday to defend the new mark -- more than it had spent on interventions in all of last week.

"The move has now led to an entrenched belief that there will be further moves in the near future," said David Hauner, emerging market strategist at Bank of America in London.

Tuesday's levels were the ruble's weakest since the basket was set at the current composition of 0.45 euros and 0.55 dollars in February 2007.

Central Bank chief Sergei Ignatyev had flagged the move on Monday, saying some ruble weakness was possible.

Interventions to prop up the ruble from widespread capital flight have helped slice more than $100 billion off national gold and forex reserves since early August, taking them below half a trillion dollars.

The Central Bank late Tuesday announced that it would lift its main interest rates to reduce capital flight and stem inflationary pressures. The bank raised the refinancing rate by 1 percentage point to 12 percent, effective Wednesday. The minimum rate for taking out one-day loans from the Central Bank in repurchase auctions was raised to 8 percent.

Most analysts had not expected a ruble devaluation so soon. "They are doing the right thing [in allowing the ruble to weaken] because the underlying economics remain -- we sell commodities ... international commodity prices have adjusted, and we have to adjust," said Elina Ribakova, chief economist for Russia at Citibank.

"They will do it similarly to the way they were doing the appreciation -- they will take it very gradually. I think it has to go another 15 percent, but they could possibly do it during the whole of next year," she said.

While oil prices have fallen about 60 percent from summer peaks, the ruble -- even after Tuesday's devaluation -- has weakened by only about 5 percent over the period, putting pressure on the resource-dependent economy.

"After today's Central Bank decision, we expect further runs on deposits," Alfa Bank said in a research note, cutting its 2009 economic growth forecast to 2 percent from 6 percent.

Vedomosti reported that clients withdrew a monthly record of 80 billion rubles ($2.93 billion) in October from accounts at Sberbank.

But Citi's Ribakova said most ordinary Russians do not look at the basket and have already weathered an 18 percent rally in the more closely watched dollar/ruble rate in three months.

Source >  The Moscow Times | nov 12