Ruble Drops to Two-Year Low; Trading Band Shifts, Citi Says

The ruble declined to its weakest close since September 2009 against the central bank’s target dollar-euro basket as oil retreated. The weakening currency forced Bank Rossii’s so-called floating corridor higher, according to Citigroup Inc.

The ruble lost 0.2 percent to 37.1336 against the basket at the 7 p.m. close in Moscow, extending this week’s loss to 3.8 percent. The ruble was unchanged at 32.0475 per dollar and 0.5 percent weaker to 43.35 per euro.

Urals crude, Russia’s chief export earner, posted the worst worst weekly retreat since May amid concern the global economy is headed for recession. Russia’s central bank may have sold as much as $3.4 billion in the past two days defending its unofficial trading band, according to VTB Capital and Citigroup estimates.

“Russian monetary authorities are doing their best to keep the situation under control,” Nikolay Podguzov, head of fixed-income strategy in Moscow at VTB Capital, the investment-banking arm of VTB Group, said by e-mail today. “Not everything depends on the central bank -- external factors matter. If we see a big event in Europe, it will be difficult to remain optimistic.”

Bank Rossii uses the basket to smooth currency movements that can hurt exporters, selling more dollars and euros the closer the ruble gets to the weaker end of the floating corridor. The bank probably spent as much as $1.6 billion yesterday, Podguzov said. Sales may have reached $1.8 billion today, Denis Korshilov, Citigroup’s Moscow-based head of fixed income, currencies and commodities, said by e-mail.

Corridor Shifts

Bank Rossii’s band for the ruble may have shifted up to 32.30 to 37.30 after today’s retreat breached the upper limit of the previous corridor of 32.15 to 37.15, according to Korshilov. The bank is keeping its ruble policy unchanged, RIA Novosti reported today, citing deputy central bank chairman Sergey Shvetsov.

A spokesman for the central bank declined to comment on intervention levels on Sept. 21 when e-mailed by Bloomberg.

The country’s gold and currency reserves fell $6.8 billion in the week to Sept. 16, the biggest decline in three months, to $532 billion, the central bank said in a statement on its website yesterday.

Investors increased bets that the ruble will weaken further with non-deliverable forwards showing it at 32.5895 per dollar in three months, compared with 32.4855 yesterday. The contracts provide a guide to expectations of currency movements and interest-rate differentials and allow companies to hedge against currency shifts.

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