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Russian Central Bank speeds up ruble depreciation
(Agencies)
Updated: 2008-12-17 21:22 MOSCOW -- The Russian Central Bank allowed the ruble to weaken by 1.2 percent against a dual-currency basket Wednesday, signaling Russia's intentions to accelerate the devaluation of the national currency.
The Central Bank allowed the ruble to drop by the most it has in three months, outstripping earlier 1 percent drops, against the basket, made up of the dollar and the euro. It marks the seventh depreciation of the national currency beyond the bank's target exchange rate since Nov. 11, and the second move in just three days. As of midafternoon, the ruble was trading at 32.5 against the basket. The ruble has come intense pressure from plummeting oil prices, massive capital outflows and a troubling economic backdrop. The Central Bank's efforts to maintain a managed float means that the currency has depreciated more slowly than those of other commodity-based economies. Many economists have called for a major one-time depreciation of between 15-20 percent to kickstart the economy and discourage further capital outflows. But the government, keen to avoid a repeat of the 1998 financial crisis when Russians rushed to withdraw their savings as the currency plummeted, has stuck to the line that it will not allow any dramatic falls in the ruble. "The continued defense of an unsustainable currency is like trying to push water uphill," said Chris Green, chief economist of London-based VTB Bank Europe. "The dynamics are suggesting that it's going to fall back again." Russia has poured tens of billions of dollars into defending the ruble, draining its vast international reserves. Reserves are down some $160 billion since August from a high of nearly $600 billion. |
