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Ruble Drops to 5-Month Low After Central Bank Loosens FX Policy

The ruble fell for a second day to a five-month low as investors speculated the central bank’s decision to loosen its exchange-rate policy amid slowing economic growth signals acceptance of a weaker currency.

The ruble lost 0.3 percent to 36.2905 per dollar at 6 p.m. in Moscow, when the central bank ceases its operations, the lowest level on a closing basis since March 20. The yield on 10-year ruble securities climbed for a third day, adding three basis points to 9.33 percent.

The ruble, the fourth-worst performer among emerging-market currencies this month, extended declines after the central bank took another step toward a freely floating exchange rate, widening the trading band and abandoning interventions within it. The economy grew 0.8 percent in the second quarter, matching the slowest pace since a contraction in 2009. Consumer prices may rise at the fastest rate in five years next year, three officials told Bloomberg last week.

“People regard the central bank’s decision to liberalize the ruble as a negative factor,” Aram Kazaryan, a foreign-exchange and interest-rates trader at OAO MDM Bank in Moscow, said in e-mailed comments. “The economy is not growing, but inflation is accelerating -- even if we forget Ukraine events.”

The ruble, which is 0.9 percent away from a record low versus the dollar, has also been weakened by falling oil prices as oil and gas account for half Russia’s budget revenue.

Brent rose 0.7 percent to $102.27 in London after falling to the lowest since June 2013, yesterday.

“Everyone’s expecting 37 rubles per dollar in the next few weeks,” Kazaryan said.

The ruble declined 0.1 percent to 48.22 per euro today and traded 0.2 percent weaker at 41.6596 against the central bank’s target basket of dollars and euros.

Companies, including exporters that generate revenue in foreign currencies, will pay about 965 billion rubles ($27 billion) in taxes through month-end, according to a Bloomberg survey, potentially boosting demand for the local currency.

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