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By Toni Vorobyova
MOSCOW, Nov 11 (Reuters) - Russia's central bank let the rouble weaken on Tuesday against a euro-dollar basket, beyond the 30.41 level it has defended in recent months, and market participants said more gradual depreciation was likely.
The rouble fell as low as 30.79 according to Reuters data, its weakest since the composition of the basket was set at the current 0.45 euros and 0.55 dollars in February 2007, and analysts say the move underlines the strain intervention has put on Russia's currency reserves -- the world's third biggest.
The rouble stabilised around the 30.71 mark which dealers said looked like the new support level.
Russian central bank chairman Sergei Ignatyev had flagged the move late on Monday, saying he did not rule out more flexibility in the exchange rate and some rouble weakness was possible.
"They are putting this policy into practice ... This is likely to continue as long as oil prices stay at current levels and do not recover," said a dealer at a European bank in Moscow.
Russia's interventions to prop up the rouble since widespread capital flight began to hit its markets have helped slice over $100 billion off its gold and forex reserves since early August, taking them below half a trillion dollars. With falling oil prices depleting the flow of new income to the reserves, experts were increasingly saying compromise on the rouble level was becoming inevitable.
"We have to make the choice: one or the other, and the sooner we decide the better. Otherwise it may turn out as before: no reserves and no strong rouble," Russian billionaire Mikhail Prokhorov wrote in Vedomosti business daily on Tuesday.
Authorities were reluctant to devalue the rouble during the 1998 financial crisis, but in the end had little choice.
Prokhorov, who is ranked Russia's fifth richest man with a $22.6 billion fortune, went on to list "the preservation of the country's gold and forex reserves" as a top-five priority.
"THE RIGHT THING"
The devaluation came sooner than most analysts had expected -- a Reuters poll at the end of last month had shown the rouble ending this year at 30.40 to the basket, but weakening to 32.20 by the end of 2009.
With oil prices down around 60 percent from summer peaks analysts argued Russia, as a resource-dependent economy and the world's number two oil exporter, could not keep propping up the rouble for ever.
"I definitely think they are doing the right thing (in allowing the rouble to weaken) because the underlying economics remain -- we sell commodities... International commodity prices have adjusted and we have to adjust," said Elina Ribakova, chief economist for Russia at Citibank.
"They will do it similarly to the way they were doing the appreciation -- they will take it very gradually. I think it has to go another 15 percent but they could possibly do it during the whole of next year," she added.
With Tuesday's depreciation the rouble is now down 4.7 percent since mid-July when oil prices were at a peak. Prior to the start of mass capital outflows and stock market slumps in August, the central bank had been gradually allowing the rouble to strengthen as part of its fight against inflation.
Russia's stock markets fell over 5 percent on Tuesday and the two main exchanges both halted stock trading for one hour during the session due to the steepness of the sell off.
One argument against letting the rouble weaken is that it could spread worry among ordinary Russians, for whom memories of the financial crisis of 1998 are still fresh.
But Citi's Ribakova said most ordinary Russians do not look at the basket, and have already weathered a slump of around 18 percent in the more closely watched value of the rouble versus the dollar since mid-July. (Additional reporting by Andrei Ostroukh, writing by Toni Vorobyova; Editing by Ruth Pitchford)