💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

UPDATE 1-Russia devalues rouble for 6th time this month

Published 12/22/2008, 03:28 AM
Updated 12/22/2008, 03:30 AM

(Adds analyst quote, background)

MOSCOW, Dec 22 (Reuters) - The Russian central bank widened the rouble trading band for the sixth time this month, allowing the currency to weaken by another 30 kopecks to 33.45 against the dollar/euro basket, a central bank source said.

Monday's move brings the rouble's losses against the basket to almost 14 percent since the Aug. 4 peak and to 9 percent since Nov. 11, when the central bank began the series of mini-devaluations.

"I have a feeling that the central bank may attempt to solve most of the rouble exchange rate problems already this year," said Trust bank analyst Evgeny Nadorshin, adding that accelerated devaluation added uncertainty to the market.

The rouble has depreciated as far in the past month as economists had expected it to weaken during the whole of next year -- in a Reuters poll in late November, the end-2009 forecast had been 33.44, end-2008 was 31.30.

Analysts view the rouble exchange rate as still undervalued even after the devaluations, forecasting there is still a way for the central bank to go.

"The market is in such a state that it expects another devaluation every day," said currency dealer Mikhail Spolokhov from Nomos bank. Dealers said they saw the central bank offering to sell foreign currency at 33.45 to the basket.

The central bank runs a managed float of the rouble, keeping it stable against the basket, made up of 0.55 dollars and 0.45 euros. Some of the devaluation moves have coincided with dollar weakness, masking the change for the general public which focuses on the dollar/rouble rate.

Officials say they have got currency speculation under control compared with previous months when Russian and foreign banks bet on the rouble's weakening and opened long foreign currency positions.

A mass exodus of Russian savers from the rouble also contributed to the attack on the currency.

The authorities used "stick and carrot" tactics warning the banks they might lose access to liquidity auctions if they buy too much foreign currency while allowing them to park dollars and euros in risk-free central bank accounts.

First Deputy Prime Minister Igor Shuvalov said last week authorities were primarily concerned with ordinary savers and held the rouble stable until November to allow them to convert savings into the foreign currency.

Shuvalov said that every Russian who wanted to switch savings into foreign currency has done so by now. (Reporting by Gleb Bryanski; editing by Stephen Nisbet)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.