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. Last Updated: 07/27/2016

New Low for Still-Falling Ruble

The ruble hit a new low of 1,677 to the dollar Wednesday on the Moscow Interbank Currency Exchange, or MICEX, from 1,668 on Tuesday and dealers expected the currency to slip further.

"It is clear that the Central Bank has decided to let the ruble slide gradually to prevent sharp falls," said dealer Oleg Afanasyev from Eskado bank.

Bankers forecast the ruble sliding to 1,700 against the dollar next week.

Dealers said the Central Bank sold only $3 million to support the ruble on Wednesday, well below intervention levels that have averaged $20-30 million in recent months.

Initial supply was $59.55 million, below initial demand for $69.50 million.

Bankers say the Central Bank appears to favor a faster ruble depreciation to counter a surge in imports. Igor Doronin, currency expert at MICEX, has said that importers are buying hard currency to conclude contracts as quickly as possible before a new import tax hike expected this month.

Dealers said daily turnover on MICEX had fallen after Moscow authorities introduced a 0.1 percent tax on all foreign exchange sales and purchases on MICEX from March 1.

A total of $62.90 million changed hands Wednesday compared with around $100 million a day last week.

"The demand for hard currency has risen, but MICEX turnover does not reflect it," said Rosmestbank dealer Alexei Sobtsov. He said that banks now trade the bulk of dollars directly among each other to avoid the tax.

The foreign exchange tax will hit the Central Bank's ability to control monetary policy through interventions, bankers say.

Bankers say MICEX handles about 40 percent of all hard currency traded by Russian banks.

The Central Bank has appealed to the City Duma and government to abolish the tax but so far has had no success.