Weekly Ruble Support Down 50%

The Central Bank sold between $7 billion and $8 billion last week to support the ruble against a euro-dollar basket, according to dealers' estimates Friday.

That amounted to about half the interventions estimated for the previous week, when the Central Bank widened the ruble's corridor, allowing a 1 percent depreciation.

The ruble has come under heavy pressure as the oil price collapses, investors flee emerging markets and local companies as well as ordinary people start to shift some of their money into foreign currencies.

The ruble closed at 30.68 against the basket Friday, in sight of the 30.70 level that is believed to be the Central Bank's new support, with dealers estimating the day's interventions at about $2 billion.

"The question is where the pressure is coming from. Now it is retail operations," said Stanislav Yarushevichus, head of trading at ING in Moscow.

"Banks have stopped speculating and pressuring the ruble. Now, after the latest ruble weakening, people no longer believe in anything and are converting everything they can [into foreign currency]. This will continue."

Russian banks in September saw ruble deposit outflows, which were only partly compensated by growth in foreign currency deposits, according to latest Central Bank data, and newspaper reports suggest that the trend has accelerated since then.

Data released on Thursday showed that Russia's gold and forex reserves fell by $21.9 billion in the week to Nov. 14 to stand at a one-year low of $453.5 billion, with dealers estimating that ruble-supporting interventions contributed about $16 billion of the weekly fall.

Prime Minister Vladimir Putin said on Thursday that the reserves -- still the world's third-largest -- and Moscow's anti-crisis measures would prevent a sharp fall in the currency.

However, analysts reckon further devaluation is in the cards. "A key point is that Putin's speech does not rule out the current Central Bank's policy of gradual devaluation, which we think indicates that authorities are indeed inclined to proceed with gradual easing of the exchange rate," Vladimir Osakovsky, analyst at UniCredit, said in a research note.

"We continue to expect that pressure on the international reserves will only intensify, eventually forcing the authorities to shift to a fully flexible exchange rate regime, implying devaluation of the ruble by some 15 percent next year."