Dec. 15 (Bloomberg) -- Russia’s central bank devalued the ruble for the second time in a week after policy makers spent $161 billion of reserves trying to defend the currency and oil revenue slumped.

The ruble fell as much as 1.4 percent to a four-year low of 37.5481 per euro after Bank Rossii widened its target exchange rate against a basket of dollars and euros. A spokesman, who declined to be identified because of bank policy, said the band was increased without specifying the amount.

Russia has drained 27 percent of its reserves, the world’s third-largest, trying to stem a 16 percent decline in the currency against the dollar since August as the price of oil fell 69 percent, constricting economic growth and companies’ ability to refinance debt. Standard & Poor’s cut its credit rating on Russia for the first time in nine years last week.

“It is possible we will see two to three more devaluations this week,” said Martin Blum, head of emerging-market currencies and fixed income strategy at UniCredit SpA in Vienna. “Russian policy makers are serious about continuing the 1 percent devaluations.”

Bank Rossii allowed the ruble to fall against a target exchange rate by 8.7 percent, from 7.7 percent last week and 3.7 percent a month ago. The ruble dropped for the ninth time in 10 days to 37.5193 per euro by 3 p.m. in Moscow, from 37.0146 on Dec. 12. Against the dollar, the currency fell 0.5 percent to 27.8240. Those movements left the ruble at 32.1853 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.

Bank Deposits

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.

Prime Minister Vladimir Putin’s pledge to avoid a “sharp” devaluation of the ruble and let the currency fall gradually has dissuaded citizens from storming banks to remove deposits as they did in 1998, when many lost life savings as the ruble plunged 71 percent versus the dollar and the government defaulted on $40 billion of debt.

Russians withdrew 6 percent from bank accounts in October, the most since Bank Rossii started collecting the data two years ago. Deposits in foreign currency, meanwhile, rose 11 percent.

Investors have pulled $211 billion out of the country since August, according to BNP Paribas SA.

“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.

Crude Slump

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.

To contact the reporters on this story: William Mauldin at wmauldin1@bloomberg.net; Alex Nicholson in Moscow at anicholson6@bloomberg.net.

Last Updated: December 15, 2008 07:27 EST