Dollar Strengthens Over Ruble Amid Crisis Fears
By Emma O’Brien
MOSCOW — The ruble weakened to an 18-month low against the dollar and strengthened for a second straight day versus the euro as the prospect of a global slowdown lures investors to the relative safety of the U.S. currency. The ruble, which is managed against a dollar-euro basket to protect the competitiveness of exports, has slumped 8.3 percent against the dollar in the past month as the credit crisis sparked by the U.S. subprime mortgage collapse prompted an exodus from emerging markets. The dollar has strengthened against all of the 26 emerging market currencies tracked by Bloomberg in the past month, except for the Hong Kong dollar. “The ruble is not doing well because of the strength globally of the dollar and what it’s doing versus the euro,” said Yaroslav Lissovolik, chief economist in Moscow at Deutsche Bank AG, the world’s largest foreign-exchange firm. “Due to a higher perception of risk, capital is going back to the States partly because it’s seen as less risky for the time being.” The currency fell as much as 1 percent to 27.4809 per dollar on Monday, the weakest since April 2006. It was at 27.3500 by 2:01 p.m. in Moscow, from 27.1991 late on Oct. 24. The ruble jumped 0.8 percent to 34.0575 per euro. The move shadowed the euro’s 1.3 percent drop versus the dollar today. “The world is in ‘get out of all assets and back into the U.S. dollar’ panic mode,” Clifford Bennett, an economist at Sonray Capital Markets Ltd. in Sydney, wrote in an e-mail to clients today. Bank Rossii, Russia’s central bank, buys and sells foreign currency reserves to keep the ruble within a trading band against the basket. It sold almost $11 billion last week to prevent the ruble from falling beyond 30.40, according to Moscow’s MDM Bank. That’s the level regarded by banks, including Credit Suisse Group, UniCredit SpA and BNP Paribas SA, as the weakest end of the trading corridor. Russia’s currency was little changed at 30.3769 against the basket, from 30.4096 at the end of last week, during which it strengthened just 0.1 percent. Three-month non-deliverable forward contracts had the ruble at 31.34 per dollar today, a 5 1/2-year low. NDFs are contracts used to fix a currency at a particular level at a future date. They are used by companies seeking protection against foreign-exchange fluctuations. Banks, including Citigroup Inc. and Goldman Sachs Group Inc., predict the ruble will weaken 5 percent versus the basket over the next year. The country’s Micex and RTS stock indexes are closed to trading until Tuesday after both falling 14 percent on Oct. 24. Crude oil, Russia’s biggest export earner, fell for a second day, extending its drop from a July 11 record of $142.27 to 57 percent. Urals crude, Russia’s main export blend, slid 10 percent last week to $59.93, below the $70 average. Russian government bonds also fell. The benchmark 7.5 percent dollar-denominated bond set to mature in 2030 was steady at an almost 7-year low of 12.37 percent.
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