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UPDATE 1-Russia spent $7-8 bn supporting rouble this wk-dealers

Published 11/21/2008, 09:59 AM
Updated 11/21/2008, 10:02 AM

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MOSCOW, Nov 21 (Reuters) - Russia's central bank sold around $7 billion to $8 billion this week to support the rouble against a euro-dollar basket, according to dealers' estimates on Friday.

That amounted to around half the interventions estimated for the previous week, when the central bank widened the rouble's corridor, allowing a 1 percent depreciation.

The rouble has come under heavy pressure as the oil price collapses, investors flee emerging markets and local companies as well as ordinary Russians start to shift some of their money into foreign currencies.

The rouble closed at 30.68 against the basket on Friday, in sight of the 30.70 level which is believed to be the central bank's new support, with dealers estimating the day's interventions at around $2 billion.

"The question is where the pressure is coming from. Now it is retail operations," saidStanislav Yarushevichus, Head of Trading at ING in Moscow.

"Banks have stopped speculating and pressuring the rouble. Now, after the latest weakening of the rouble, people no longer believe in anything and are converting everything they can (into foreign currency). This will continue."

Russian banks saw rouble deposit outflows in September, which were only partly compensated by growth in foreign currency deposits, according to latest central bank data, and newspaper reports suggest the trend has accelerated since then.

Data released on Thursday showed that Russia's gold and forex reserves fell by $21.9 billion in the week to Nov. 14 to stand at a one-year low of $453.5 billion, with dealers estimating that rouble-supporting interventions contributed around $16 billion of the weekly fall.

Prime Minister Vladimir Putin said on Thursday that the reserves -- still the world's third-largest -- and Moscow's anti-crisis measures would prevent a sharp fall in the currency.

However, analysts reckon further devaluation is on the cards. "A key point is that Putin's speech does not rule out the current central bank's policy of gradual devaluation, which we think indicates that authorities are indeed inclined to proceed with gradual easing of the exchange rate," Vladimir Osakovsky, analyst at UniCredit, said in a research note.

"We continue to expect that pressure on the international reserves will only intensify, eventually forcing the authorities to shift to a fully flexible exchange rate regime, implying devaluation of the rouble by some 15 percent next year." (Reporting by Andrei Ostroukh and Toni Vorobyova; editing by David Stamp)

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