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Capital outflow contributes to ruble’s downslide - analysts

September 22, 2011, 19:13 UTC+3
This situation looks rather strange against a background of Russia's GDP growth by more than 4 percent
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MOSCOW, September 22 (Itar-Tass) —— In today’s currency trading the dollar pierced the resistance level of 32 rubles, updating a two-year maximum. According to information received from the exchanges, after 14:40 Moscow time the U.S. currency jumped 53 cent to the previous day's close and was trading at 32.0050 rubles to the dollar, returning to the level of September 2, 2009.

This situation looks rather strange against a background of Russia's GDP growth by more than 4 percent, a budget surplus over the past eight months of this year, and the trade surplus. "This very strong capital outflow contributes to a significant drop of the ruble. In the case of global economy normalization, particularly, that in Europe, capital will be back to the emerging markets, including that in Russia," says the head of the money market analytical department of Probiznesbank, Novel Markov. The situation can only change if and when direct investment dominates over portfolio and speculative ones.

Analysts tend to believe that in case of further depreciation of the ruble the Bank of Russia will start interventions. The head of analysis department at the BKF-Bank, Maxim Osadchy, does not exclude the possibility that the CBR has already begun interventions, but the Finance Ministry’s injections of tens of billions of rubles in the form of deposits reduces the regulator’s efforts to nothing.

According to Markov, the trading range for the ruble against the dollar in the near future may make 30.5-32 rubles per dollar.

"Trying to go beyond the upper limit will encounter resistance from the Central Bank," he said. Meanwhile, the Central Bank, as always, prefers to watch and wait. In general, the regulator always acts with a delay. "Therefore, if the ruble’s steep fall continues, we will probably see the Central Bank in action soon," says Markov. By and large, it is not the task of the Central Bank to control the ruble. It acts within the framework of its monetary policy, which implies relatively free movement of currency within the corridor.

Formally, the current weakening of the ruble is happening within the currency corridor of the Bank of Russia, the upper limit of which is within 37.15-37.25 rubles against the currency basket. In addition, the Central Bank recently announced that the corridor’s current borders were fully satisfactory and there were no plans to change them.

"From the negative point of view nothing unexpected is happening and more prominent involvement of the Central Bank will be seen closer to the border of the corridor, while the chances of going beyond it are very slim, given the remaining generally stable oil prices," says Veles Capital analyst Yuri Kravchenko.

In general, experts recommend not to make "any sudden movements" - purchases or buys of any currency.

"Usually, after such sharp declines, non-specialists begin to rush to do something which, quite logically, leads to disastrous results," says Markov. In addition, analysts say the ruble’s fall is short-term, and in the case of an improvement of the global economic situation the Russian currency may recover from the decline.

The Bank of Russia on Thursday set the official rates of the dollar and euro against the ruble as of September 23. The official rate of the European currency was increased by 22.94 kopecks to 43.2421 rubles for one euro. The dollar’s rate is at 31.9106 rubles to the dollar. As compared with the previous indicator, it rose by 49.84 kopecks.

 

 

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