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Friday, 12 December 2008
Sinking reserves force Russia to devalue again
Russia devalued the rouble for the fifth time in a month, widening its trading band against the US dollar and euro after reserves fell US$161 billion defending the exchange rate.
Russia devalued the rouble for the fifth time in a month, widening its trading band against the US dollar and euro after reserves fell US$161 billion defending the exchange rate.
Bank Rossii extended the amount the rouble could decline against a target exchange rate to 7.7 per cent, from 6.7 per cent on Wednesday and 3.7 per cent a month ago. The band was widened by 30 kopeks yesterday, a spokesman said.
The currency weakened 0.7 per cent against a basket made up of the dollar and the euro.
“They don’t have a choice but to let it weaken and the faster they do it the better,” said Beat Siegenthaler, the head of emerging markets strategy at TD Securities.
“Regular weekly steps are now the most likely scenario.”
Russia has drained as much as 27 per cent of its reserves since August to stymie a 16 per cent decline in the rouble against the dollar as tumbling oil prices, the war in Georgia and the worst global financial crisis since the Depression caused investors to remove almost US$200 billion from the country, BNP Paribas data shows.
The rouble fell 4.8 per cent against the central bank’s basket in the past month.
Goldman Sachs predicts the sliding price of oil will force a rouble drop of as much as 25 per cent in the next 12 months.
Troika Dialog, Russia’s oldest investment bank, is calling for a one-time, 20 per cent devaluation late next month, when there is less risk of bank runs during the New Year’s holidays.
UniCredit forecasts a 15 per cent decline by the end of next year.
The world’s biggest energy producer is suffering as the price of Urals crude, its main export blend, has dropped 71 per cent from a July record to US$40.74 a barrel, below the US$70 average required to balance the nation’s budget next year.
Russians withdrew 6 per cent of their savings accounts in October, the most since Bank Rossii started collating the data two years ago. Meanwhile, deposits in foreign currency rose 11 per cent.
Foreign-exchange reserves decreased by US$17.9 billion to US$437 billion in the week to December 5, more than the US$11.25 billion decline that was the median estimate of five economists surveyed.
Prime Minister clast week pledged to use the nation’s reserves stockpile, the world’s third largest, to prevent sharp movements in the currency.
The rouble dropped as much as 1.3 per cent to 36.71 per euro, the weakest since September 25. It was at 36.65 per euro in Moscow morning trade, from 36.66 on Wednesday. Against the dollar, the currency fell 0.4 per cent to 27.94.
Those movements left the rouble at 31.8627 against the basket, which is made up of about 55 per cent dollars and the rest of euros.
The weakest end of the trading band was now about 31.90, from the previous 31.60, said Mr. Siegenthaler, who predicts a further 20 per cent drop against the basket should oil prices stay at current levels.
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Sinking reserves force Russia to devalue again
Bloomberg in Moscow
12 December 2008
Russia devalued the rouble for the fifth time in a month, widening its trading band against the US dollar and euro after reserves fell US$161 billion defending the exchange rate.
Bank Rossii extended the amount the rouble could decline against a target exchange rate to 7.7 per cent, from 6.7 per cent on Wednesday and 3.7 per cent a month ago. The band was widened by 30 kopeks yesterday, a spokesman said.
The currency weakened 0.7 per cent against a basket made up of the dollar and the euro.
“They don’t have a choice but to let it weaken and the faster they do it the better,” said Beat Siegenthaler, the head of emerging markets strategy at TD Securities.
“Regular weekly steps are now the most likely scenario.”
Russia has drained as much as 27 per cent of its reserves since August to stymie a 16 per cent decline in the rouble against the dollar as tumbling oil prices, the war in Georgia and the worst global financial crisis since the Depression caused investors to remove almost US$200 billion from the country, BNP Paribas data shows.
The rouble fell 4.8 per cent against the central bank’s basket in the past month.
Goldman Sachs predicts the sliding price of oil will force a rouble drop of as much as 25 per cent in the next 12 months.
Troika Dialog, Russia’s oldest investment bank, is calling for a one-time, 20 per cent devaluation late next month, when there is less risk of bank runs during the New Year’s holidays.
UniCredit forecasts a 15 per cent decline by the end of next year.
The world’s biggest energy producer is suffering as the price of Urals crude, its main export blend, has dropped 71 per cent from a July record to US$40.74 a barrel, below the US$70 average required to balance the nation’s budget next year.
Russians withdrew 6 per cent of their savings accounts in October, the most since Bank Rossii started collating the data two years ago. Meanwhile, deposits in foreign currency rose 11 per cent.
Foreign-exchange reserves decreased by US$17.9 billion to US$437 billion in the week to December 5, more than the US$11.25 billion decline that was the median estimate of five economists surveyed.
Prime Minister clast week pledged to use the nation’s reserves stockpile, the world’s third largest, to prevent sharp movements in the currency.
The rouble dropped as much as 1.3 per cent to 36.71 per euro, the weakest since September 25. It was at 36.65 per euro in Moscow morning trade, from 36.66 on Wednesday. Against the dollar, the currency fell 0.4 per cent to 27.94.
Those movements left the rouble at 31.8627 against the basket, which is made up of about 55 per cent dollars and the rest of euros.
The weakest end of the trading band was now about 31.90, from the previous 31.60, said Mr. Siegenthaler, who predicts a further 20 per cent drop against the basket should oil prices stay at current levels.
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