Bloomberg News

Russia Sold $8 Billion, Most Since Ruble’s 2009 Devaluation

October 05, 2011

(Closes ruble prices in 12th paragraph.)

Oct. 5 (Bloomberg) -- Russia’s central bank sold about $8 billion to shore up the domestic currency last month, the most since it arrested the ruble’s devaluation in January 2009, Chairman Sergey Ignatiev said.

Bank Rossii intensified sales yesterday, selling $1.15 billion on the currency market, a “bigger than usual” step, Ignatiev told reporters today in Moscow. The ruble yesterday depreciated against the dollar for a fifth day, plunging to the weakest close in more than two years.

Policy makers in emerging markets are seeking to bolster their weakening currencies as global demand sags and the debt crisis on both sides of the Atlantic drains capital. Turkey’s central bank today sold $750 million for liras, its biggest such sale on record, after offering as much as $1.35 billion in a daily auction. The ruble is the fourth-worst performer so far this month among the 25 emerging-market currencies tracked by Bloomberg.

Brazil’s central bank will keep acting in the dollar futures market and has “no limit” on how much it can use derivatives to stem a decline in the real, Aldo Mendes, director of monetary policy at the bank, said Sept. 22. Authorities will combat “herd behavior” in the financial markets, Korean Finance Minister Bahk Jae Wan said Sept. 23.

Capital Flight

Outflows of capital from Russia reached an estimated $18.7 billion in the third quarter, bringing this year’s total to $49.3 billion, Bank Rossii said in a statement late yesterday. Data were revised to show that $21.4 billion and $9.2 billion left the country in the first and second quarters, respectively, the statement showed.

The central bank “will discuss” a revision of its forecast for $36 billion of capital flight this year, Ignatiev said. Outflows reached $13 billion last month because of an unfavorable investment climate and global economic problems, he said in a speech to lawmakers today.

The currency sales suggest the bank will guard against sharp currency moves after burning through about a third of its international reserves, the world’s third-largest, two years ago in a bid to prop up the ruble.

The regulator will “maintain its presence on currency markets exclusively to limit excess volatility of the exchange rate, without influencing its trajectory as determined by fundamental factors,” Bank Rossii said in a draft three-year plan for its monetary policy published on its website Oct. 3.

The central bank drained more than $200 billion in the six months through January 2009 to stem a 35 percent devaluation of the ruble to the dollar.

Band Shifted

Bank Rossii probably shifted the upper end of a floating five-ruble band in which it manages the ruble by 10 kopeks to 37.6 versus its target dollar-euro basket after yesterday’s sales, Nikolay Podguzov and Maxim Korovin, analysts at VTB Capital in Moscow, said in an e-mailed research note today.

The basket corridor is moved by 5 kopeks once Bank Rossii’s interventions top $600 million.

The ruble strengthened 0.5 percent to 32.5625 per dollar and rose 0.3 percent to 43.3425 against the euro by the 7 p.m. close in Moscow. The moves left it 0.4 percent stronger at 37.4135 against the central bank’s basket of about 55 percent dollars and 45 percent euros, which it uses to ease swings in the ruble that hurt exporters.

‘Grounds’ for Stronger Ruble

There are “grounds” for the ruble to rebound to 30 per dollar, Deputy Economy Minister Andrei Klepach told reporters today in Moscow. Capital outflows may reach $50 billion this year, he said.

The nine-month capital outflows equal about 4 percent of Russia’s gross domestic product and were “worse than expected,” Natalia Orlova and Dmitry Dolgin, analysts at Alfa Bank in Moscow, said today in an e-mailed note. Alfa, Russia’s largest private lender, forecasts 2011 outflows of $60 billion.

The third-quarter figure “may become an additional factor triggering expectations of ruble depreciation and thus higher demand for foreign currency,” they wrote.

--With assistance from Selcuk Gokoluk in Istanbul. Editors: Paul Abelsky, Alan Crosby

To contact the reporters on this story: Artyom Danielyan in Moscow at adanielyan@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editors responsible for this story: Mark Sweetman at msweetman@bloomberg.net; Balazs Penz at bpenz@bloomberg.net


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