Sept. 29 (Bloomberg) -- The ruble weakened against the dollar, extending its worst quarterly depreciation since 2009 as Russia’s reserves fell for a third week after the central bank sold dollars and euros to slow the ruble’s decline.
Russia’s currency depreciated 0.3 percent to 31.85 per dollar at the 7 p.m. close in Moscow. The ruble has fallen 12 percent against the greenback this quarter, the biggest drop since the three-month period ended March 31, 2009.
Russia’s international currency and gold reserves fell for a third consecutive week, the central bank said in a statement today, losing $6 billion to $526 billion. Global investors anticipate Europe’s debt crisis leading to an economic slump, a financial meltdown and social unrest in the next year, with 72 percent predicting a country abandoning the euro as a currency within five years, a Bloomberg survey found. The European Union is Russia’s biggest trading partner.
The new reserves data suggest “that the central bank has intervened for about $3.6 billion in the week ending last Friday” to slow the currency’s decline, Gyula Toth, the Vienna- based chief strategist for central and eastern Europe, the Middle East and Africa at UniCredit SpA, wrote in an e-mailed research note today.
Bank Rossii sold more than $6 billion of its currency reserves since the start of September, Chairman Sergey Ignatiev told reporters in Moscow Sept. 27. The bank is “entirely satisfied” with its current intervention system, he said.
The ruble lost 0.5 percent to 43.4375 per euro today, leaving it down 0.4 percent at 37.0644 against the basket.
The ruble’s weakening poses “serious risks” of stoking inflation, Ignatiev said. Russia’s annual inflation rate has fallen in the three months through August and currently stands at 8.2 percent, the slowest pace since November.
The central bank should maintain “tight” monetary policy to curb price growth, Odd Per Brekk, the International Monetary Fund’s senior representative in Moscow, said at a JetFin conference in Geneva today. Policy makers should seek to slow price increases even as the economy faces “downside” risks, Brekk said.
Russia cut lending rates for the first time in 15 months on Sept. 14, lowering the rate on repurchase loans in a bid to boost the amount of cash available to lenders.
Europe’s debt crisis and lower oil prices mean Russia’s gross domestic product will grow 4.3 percent in 2011, down from a previous estimate of 4.8 percent, and 4.1 percent next year, compared with an earlier forecast of 4.5 percent, the IMF said in a report on Sept. 27.
German lawmakers today approved changes that will expand the firepower of the European Financial Stability Facility bailout fund.
Investors increased bets the ruble will depreciate further, with non-deliverable forwards showing it dropping to 32.3552 per dollar in three months’ time, compared with 32.2101 yesterday. NDFs provide a guide to expectations of currency movements and interest-rate differentials.
Russia’s only ruble Eurobond fell today, cutting the yield one basis point, or 0.01 percentage point, to 8.204 percent. Sovereign dollar bonds due in 2020 rallied, with the yield down nine basis points at 5.072 percent.
--Editors: Alex Nicholson, Linda Shen
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