Ruble Trades Near 1 1/2-Week Low as Russia Offers Loan to Banks

By Ewa Krukowska

Sept. 17 (Bloomberg) -- Russia's ruble was little changed, holding near a 1 1/2-week low against the dollar-euro basket, after the Finance Ministry pumped $44 billion into its three largest banks and halted stock trading for a second day.

The ruble fell versus the euro as the Micex Index of stocks sank 3.1 percent when trading was suspended indefinitely, bringing its three-day drop to 25 percent. Investors sold emerging-market assets after the collapse of Lehman Brothers Holdings Inc. and the U.S. government rescued insurer American International Group Inc. The Russian currency gained against the dollar.

``Now the epicenter is global credit markets and in Russia it is the same too,'' said Martin Blum, the head of emerging-markets economics and strategy in Vienna at UniCredit MIB. ``So far there hasn't been a huge change in sentiment, only some stabilization following the morning announcement about the loan to banks.''

The ruble was at 30.3789 versus the basket at 6:37 p.m. in Moscow, from 30.3808 yesterday and near 30.3898 reached two days ago, the lowest since Sept. 4.

The currency declined to 36.2825 per euro, from 36.2048 yesterday. Against the dollar, the ruble rose to 25.5558, from 25.6158, as the Federal Reserve's $85 billion bailout of AIG failed to quell concern credit-market losses will deepen.

The ruble may advance to 29.9 against the basket at the end of this year, according to Blum.

The central bank, Bank Rossii, keeps the currency within a trading band against the basket to limit the effect of its fluctuations on the competitiveness of Russian exports.

Government Loan

The Finance Ministry extended the repayment period on loans available to OAO Sberbank, VTB Group and OAO Gazprombank to three months from one week.

Russia's markets are facing the biggest test since the government defaulted in 1998. The decade-long economic boom is fading, foreign investors have pulled at least $35 billion from the nation's stocks and bonds since the five-day war in Georgia last month, and the collapse this week of Lehman prompted a flight from emerging markets.

The government yesterday injected $20 billion into the interbank lending market via central bank and Finance Ministry auctions in a bid to contain soaring borrowing rates as credit dried up. The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent.

To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net