Russia devalues 2nd time in week, rouble falls total 8.7%

Updated: Dec 16 2008, 06:08am hrs
Russias 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 rouble fell as much as 1.4% 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% of its reserves, the worlds third-largest, trying to stem a 16% decline in the currency against the dollar since August as the price of oil fell 69%, constricting economic growth and companies ability to refinance debt. Standard & Poors 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% devaluations.

Bank Rossii allowed the rouble to fall against a target exchange rate by 8.7%, from 7.7% last week and 3.7% a month ago. The rouble dropped for the ninth time in 10 days to 37.5193 per euro in Moscow, from 37.0146 on December 12. Against the dollar, the currency fell 0.5% to 27.8240. Those movements left the ruble at 32.1853 versus the central banks basket, which is made up of about 55% dollars and the rest euros.

The currency has fallen 5.9% against the basket in six increases of the trading band since November 11.