Russia Depreciates Ruble for 4th Time in Month as Oil Falls

By Emma O’Brien

Dec. 5 (Bloomberg) -- The ruble dropped to near the lowest in three years against the dollar after the central bank widened the currency’s trading band as the price of Urals crude, Russia’s main export, fell below $40 a barrel.

“The corridor has been widened,” a Bank Rossii official who declined to be identified on bank policy said in a telephone interview from Moscow today.

Bank Rossii has drained a quarter of the nation’s foreign- currency reserves and raised interest rates twice last month to arrest a 17 percent drop in the currency since August.

“Given oil is already below $40 a barrel we can’t rule out more depreciation,” said Evgeny Gavrilenkov, chief economist at Troika Dialog in Moscow, Russia’s oldest investment bank. “Any further devaluation depends on oil.”

The currency slid as much as 1.2 percent to 28.1207 per dollar today, the weakest since February 2006. It traded at 35.9162 per euro, the lowest since Oct. 3.

The central bank buys and sells foreign currency to keep the ruble within a target trading band, which is managed against a basket of dollars and euros. Policy makers have widened the corridor four times since Nov. 11.

Urals crude, Russia’s main oil export blend, slid to $39.34 a barrel yesterday, the lowest in three years.

“We could see the ruble 15 percent weaker against the basket in the six months and 20 percent weaker in 12 months,” said Elisabeth Andreew, chief currency strategist in Copenhagen at Nordea AB, Scandinavia’s biggest bank. “We will see more gradual devaluations of around 1 percent at a time.”

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net