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Falling rouble may cause capital outflow - analysts

September 26, 2011, 16:18 UTC+3
Over the past week, interventions of Russia’s Central Bank may have made 4-5 billion dollars
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MOSCOW, September 26 (Itar-Tass) —— Continuing descent of the rouble rate may cause major capital outflow in the current month already, analysts told Itar-Tass on Monday.

Over the month, capital outflow may reach 20-30 billion dollars, which would require the Central Bank to have monthly selling of currency worth 12-25 billion dollars, or about the amounts of October 2008 – January 2009, Raiffeisenbank’s analysts say.

Over the past week, interventions of Russia’s Central Bank may have made 4-5 billion dollars, they say.

“If the situation at international markets does not stabilise, the regulator may face the necessity to spend another five billion dollars to support the rouble rate,” VTB Capital’s analysts say.

Those interventions have shifted the Central Bank’s currency corridor from 32.15-37.15 to 32.35-37.35 roubles per a dollar. Despite the expected expansion of the currency corridor, the regulator confirmed its policy of active interventions for protection of the corridor borders in future.

Russia’s international reserves, which now make about 530 billion dollars, will go down in such a situation by about 20 billion dollars a month, thus exhausting them, and weakening trust in rouble. Raiffeisenbank says that if oil prices fall for a long time and the international economic situation worsens, “there would be high chances for formation of stable devaluation expectations.”

Besides, the dramatic worsening of the international economic situation will develop the tendency to convert savings into foreign currencies, which would cause further capital outflow, and thus violent devaluation.

Individuals also “push” the rouble downwards. Banks’ consumer clients joined escape from rouble in late past week.

“In this situation, the market is most likely to continue testing borders of the currency corridor,” Alfa Bank’s analysts say. If individuals buy dollars actively /besides them, there are banks, who are involved in the market/, the devaluation may become uncontrolled.

Under these conditions there is one outstanding question: what would be the rates of the rouble slump, as with the present volatility of the markets its further descent is unlikely to be avoidable.

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