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Russia devalues ruble again

RUSSIA'S ruble slid to the weakest level yesterday in almost six years against the United States dollar as the central bank devalued the currency for the second day amid declining oil prices.

The ruble fell 1.4 percent to 30.9752 per US dollar by 10:47am in Moscow yesterday, from 30.5312 on Sunday, extending a 25-percent decline since August. The currency weakened 1.2 percent to 35.7187 versus its target basket of dollars and euros. The range the ruble is allowed to trade within the basket was widened, a central bank official, who declined to be identified on bank policy, said by telephone with Bloomberg News yesterday. Official trading began on Sunday for the first time this year.

"After the long holiday the central bank came back intent on showing they're still on a devaluation path," said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt.

"With the oil price shock there is an increased burden on Russia's current account and that necessitates a rebalancing of the currency."

The ruble may retreat 10 percent against the basket this month as companies and banks buy foreign currency to repay more than US$80 billion of debt this year, according to Societe Generale SA. Danske Bank A/S in Copenhagen sees a 15-percent drop in the ruble by year end.

The ruble traded at 41.5087 per euro, according to Bloomberg data, down 0.9 percent from 41.1317 on Sunday, based on figures from the Micex stock exchange.

Bank Rossii, the central bank, has devalued the currency 14 times since November 11 as Urals crude, Russia's main export blend, slid for a fourth day to US$42.99 a barrel, below the US$70 average required to balance this year's budget. Policy makers also devalued the ruble against the basket on Sunday, the official said.

The nation, which is the world's largest energy exporter, has depleted its foreign-currency reserves by 27 percent since the start of August as the central bank sought to mitigate the ruble's slide.

Investors have withdrawn more than US$200 billion from Russia since then, said BNP Paribas SA, amid the global credit-market crisis.


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