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Ruble sinks to a 10-year low
By Emma O'Brien |
January 17, 2009, Saturday
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Russia's ruble sank the most against the dollar in a decade last week as the central bank quickened its devaluation of the currency to protect reserves.
The ruble tumbled to as low of 32.6675 per dollar, the weakest since the currency was redenominated on January 1, 1998, eight months before Russia defaulted on US$40 billion of debt. The ruble is bound for a 5.5-percent decline in the first week of trading this year, the most since March 1999. Bank Rossii devalued the currency for the fifth time in six days, a central bank official said yesterday.
Russia is stepping up the pace of devaluation from an average of twice a week in November and December after spending US$25 billion this week defending the currency, according to estimates by Trust Investment Bank in Moscow. Prime Minister Vladimir Putin pledged last month to use the nation's currency reserves, the world's third-largest, to avoid "sharp" declines in the ruble. The stockpile shrank 29 percent to US$426 billion since August.
"The moves now are faster, because the slower they move the easier it is for the market to position for further devaluation," said Roderick Ngotho, an emerging-markets currency strategist in London at UBS, which forecasts a further 6.8 percent depreciation in the ruble versus the basket. Investors withdrew about US$245 billion from Russia in the last four months of 2008, according to BNP Paribas, amid the country's worst financial crisis since the 1998 economic collapse, plunging commodity prices and an internationally condemned conflict with neighboring Georgia.
Depreciations
The ruble has lost 28 percent against the dollar and 15 percent against the euro since August. The currency has slipped 27 percent against the basket, with the central bank allowing 17 depreciations in the past two months.
"If the government had actually announced a one-off devaluation of around 30 percent in the autumn the issue would probably be done and dusted by now," Chris Weafer, chief strategist in Moscow at UralSib Financial Corp, wrote in an e-mail to clients yesterday. "Instead, the salami-slice approach that the central bank is using has created considerable uncertainty and the expectation of further weakness."
The currency lost 1.2 percent to 37.3427 against the basket, by 11:14am in Moscow. The ruble weakened 1.4 percent to 43.0332 per euro, adding to this week's 9.4 percent drop, also headed for its biggest weekly decline since March 1999.
The ruble tumbled to as low of 32.6675 per dollar, the weakest since the currency was redenominated on January 1, 1998, eight months before Russia defaulted on US$40 billion of debt. The ruble is bound for a 5.5-percent decline in the first week of trading this year, the most since March 1999. Bank Rossii devalued the currency for the fifth time in six days, a central bank official said yesterday.
Russia is stepping up the pace of devaluation from an average of twice a week in November and December after spending US$25 billion this week defending the currency, according to estimates by Trust Investment Bank in Moscow. Prime Minister Vladimir Putin pledged last month to use the nation's currency reserves, the world's third-largest, to avoid "sharp" declines in the ruble. The stockpile shrank 29 percent to US$426 billion since August.
"The moves now are faster, because the slower they move the easier it is for the market to position for further devaluation," said Roderick Ngotho, an emerging-markets currency strategist in London at UBS, which forecasts a further 6.8 percent depreciation in the ruble versus the basket. Investors withdrew about US$245 billion from Russia in the last four months of 2008, according to BNP Paribas, amid the country's worst financial crisis since the 1998 economic collapse, plunging commodity prices and an internationally condemned conflict with neighboring Georgia.
Depreciations
The ruble has lost 28 percent against the dollar and 15 percent against the euro since August. The currency has slipped 27 percent against the basket, with the central bank allowing 17 depreciations in the past two months.
"If the government had actually announced a one-off devaluation of around 30 percent in the autumn the issue would probably be done and dusted by now," Chris Weafer, chief strategist in Moscow at UralSib Financial Corp, wrote in an e-mail to clients yesterday. "Instead, the salami-slice approach that the central bank is using has created considerable uncertainty and the expectation of further weakness."
The currency lost 1.2 percent to 37.3427 against the basket, by 11:14am in Moscow. The ruble weakened 1.4 percent to 43.0332 per euro, adding to this week's 9.4 percent drop, also headed for its biggest weekly decline since March 1999.
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