The ruble fell as much as 1.3 percent to a four-year low of 37.5015 against the euro after Bank Rossii widened the trading band against a basket of dollars and euros, the mechanism by which it manages the exchange rate.
Russia has depleted its reserves, the world’s third- largest, since August after the ruble fell 16 percent against the dollar, leading to the first downgrade in nine years from Standard & Poor’s last week. Investors pulled about $211 billion out of the country, according to BNP Paribas SA data, as the 69 percent decline in oil from its July peak hampered the economy.
“They should seize the opportunity and devalue a couple more times in the next few days,” said Martin Blum, head of emerging-market currencies and fixed income strategy at UniCredit SpA in Vienna.
Bank Rossii allowed the ruble to decline against a target exchange rate by 8.6 percent, from 7.7 percent last week and 3.7 percent a month ago. A spokesman confirmed the band was widened, declining to be identified because of bank policy.
The ruble was at 37.4384 per euro by 11:33 a.m. in Moscow, from 37.0146 on Dec. 12. Against the dollar, the currency fell 0.6 percent to 27.8384. Those movements left the ruble at 32.1631 versus the central bank’s basket, which is made up of about 55 percent dollars and the rest euros.
The currency has fallen 5.9 percent against the basket in six increases of the trading band since Nov. 11.
A one-time, 20 percent devaluation is needed, according to Moscow brokerage Troika Dialog. Goldman Sachs Group Inc. forecasts a decline of as much as 25 percent versus the basket.
Concern of further devaluations led Russians to withdraw 6 percent from their savings accounts in October, the most since Bank Rossii started collecting the data two years ago. Deposits in foreign currency, meanwhile, rose 11 percent as the currency’s decline sparked concern. Many Russians lost their life savings in 1998 after the ruble plunged 71 percent versus the dollar and the government defaulted on $40 billion of debt, spurring a global investor stampede to the safest assets.
“A significant weakening of the dollar against the euro provides a very good opportunity for the central bank to widen the corridor without alerting the population too much,” said Tatiana Orlova, economist at ING Groep NV in Moscow.
The world’s biggest energy producer is suffering as the price of Urals crude, its main export blend, has dropped 69 percent from a July record to $44.13 a barrel, below the $70 average required to balance the nation’s 2009 budget. The Russian economy may now go into reverse, according to Deputy Economy Minister Andrei Klepach, the first government official to suggest that the Russian economy is heading for recession.
Deutsche Bank AG cut its estimate for growth in Russia’s gross domestic product to 1 percent next year, from 3.4 percent previously.
The central bank’s foreign-exchange reserves decreased by $17.9 billion to $437 billion in the week to Dec. 5, more than the $11.25 billion decline that was the median estimate of five economists surveyed by Bloomberg. Prime Minister Vladimir Putin pledged on Dec. 4 to use the nation’s reserves stockpile, still the world’s third largest, to prevent “sharp” movements in the currency. The reserves are about 24 times bigger now than they were on the eve of the default 10 years ago.
Russia has pledged about $200 billion in loans, tax cuts and other measures to boost liquidity and reduce borrowing costs as the 50-stock RTS Index heads for its worst year since 1998. The government is giving state-run Vnesheconombank $50 billion from the package to help companies pay off foreign debt.
S&P downgraded the nation’s sovereign debt to BBB, the second-lowest investment grade rating.