Ruble Hits 11-Year Low as Traders Push to Break Target
By Emma O’Brien
Bloomberg
The ruble slumped to its weakest level against the dollar in 11 years on Monday as investors speculated Russia will be forced to give up its currency defense after draining reserves. The ruble lost as much as 1.7 percent to 36.3550 per dollar, nearing the weakest end of a trading range widened by the central bank less than two weeks ago. Bank Rossii Chairman Sergey Ignatiev pledged on Jan. 22 to use reserves to keep the currency at a level of 41 against a basket of dollars and euros, which translated to 36 per dollar. Based on current euro-dollar rates, the ruble would need to fall to 36.45 per dollar to break the band, according to Merrill Lynch & Co. A central bank spokesman declined to comment. “The pace of the move to the target is definitely going to be a source of concern to the central bank,” said Martin Blum, head of emerging-market economics and currency strategy at UniCredit SpA in Vienna. “Global risk appetite is continuing to deteriorate so the pressures on the ruble will continue.” The ruble slumped 35 percent against the dollar since August as a 63 percent drop in Urals crude oil prices and the worst global economic crisis since the Great Depression spurred investors and Russian citizens to withdraw about $290 billion from the country, according to BNP Paribas SA. Bank Rossii expanded its trading range for the ruble 20 times since mid-November before switching policy to let “market” forces help determine the exchange rate within a widened limit. The new trading band would only be extended should oil, Russia’s biggest export earner, fall to $30 a barrel and stay there “for a long time,” Ignatiev said Jan. 22. Prime Minister Vladimir Putin said in a Jan. 25 interview with Bloomberg Television that Russia had set itself apart from other countries by using reserves so as not to “crush the national currency overnight,” avoiding a repeat of the crisis a decade ago when the ruble plunged as much as 29 percent in a day as the government defaulted on $40 billion of debt. The central bank raised its benchmark one-day and seven-day interest rates through loan auctions on Friday to make borrowing money to speculate on the ruble more expensive. Bank Rossii lent 7.7 trillion rubles ($213 billion) to Russian banks in so-called repo auctions last month, aiding the ruble’s depreciation as lenders converted the funds into foreign currency, according to UniCredit and ING Groep NV. Russia reduced its foreign-currency reserves, the world’s third-largest, by more than a third to $386.5 billion since August as it sold dollars and euros to stem the ruble’s depreciation. The central bank, which was offering foreign currency from Jan. 28 to 30, is yet to be seen making offers on the market today, said Evgeny Nadorshin, senior economist at Trust Investment Bank, citing the Moscow-based lender’s currency traders. The ruble was 1.3 percent weaker at 36.2073 per dollar and 1.2 percent lower against the basket at 40.7303, which is 0.7 percent away from the target limit of 41, as of 5 p.m. in Moscow. It dropped 1 percent to 46.2471 per euro. Russia has managed the ruble against a basket made up of about 55 percent dollars and the rest euros since 2005, to limit currency swings that disadvantage Russian exporters. The basket rate is calculated by multiplying the ruble’s rate to the dollar by 0.55, the euro rate by 0.45, then adding them together. The dollar’s strength accelerated the ruble’s depreciation against the U.S. currency. The dollar gained against all 16 major currencies tracked by Bloomberg on Monday, except for the Mexican peso, Japanese yen and Danish krone, climbing as much as 0.8 percent to 1.2706 per euro.
|
Ïåðåâåñòè íà ðóññêèé
Print this article
Issues Archive
Issue in PDF
Issue in RSS